Human Resource Accounting: A Panacea to Financial Reporting Problem

Ishola Akintoye, Tunji Siyanbola, Isoken Adekunle, Rebecca Benjamin


Contemporary accounting scandal in the corporate world has cast aspersions on the reliability of financial reporting calling for urgent solution to restore lost investors’ confidence.  This study examined how the inclusion of human assets in the statement of financial position of companies could serve as a panacea towards answering the reliability question in financial reporting, since most of the said scandals have been attributed to human behaviour.  Secondary data obtained from four companies, 2 each in Nigeria and Ghana (Cadbury Nigeria Plc; Dangote Cement Plc; Fan Milk Ghana Limited and PZ Cussons Ghana Ltd) for 2012-2015 were analysed using descriptive and inferential statistics. The Lev & Schwartz’s Present value of future earnings model was adopted to recognise the human assets in those reports with the amended financials revealing an improvement in the value of the companies.  The result of the statistical test showed mixed results revealing non-normality of almost all the financial indices of Return on Asset, Return on Equity, Leverage and Earnings Per Share, thereby resulting in the rejection of the null hypotheses while the Analysis of Variance favoured the null, as the test reveals higher f-stat (p-val.) at 5% significant level for all the financial indices. It was concluded that human resource accounting may resolve some unethical challenges questioning the reliability of financial reporting. It was therefore recommended that accounting standard setters, IASB, should bring out an exposure draft for an enduring standard on human resource accounting.

Keywords: accounting standards, financial reporting, human assets, human resources accounting, reliability.

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