Assessing The Impact Of Human Resources Accounting Practices On The Performance Of Manufacturing Industries In Nigeria

Assessing The Impact Of Human Resources Accounting Practices On The Performance Of Manufacturing Industries In Nigeria

Chapiter 1

Introduction

1.1 The Study’s Context

A group of people who work for a company or organization collectively are referred to as its human resource. Syed (2009) defines it as the human energy, abilities, skills, and knowledge that are currently being used or that have the potential to be used in the creation of things or the provision of useful services. Human resources are the most valuable assets at the disposal of organizations because they can effectively and efficiently maximize other resources like land, equipment, and money, which is why they are essential to the success of any firm. The phrase “our greatest assets are our people” is therefore stated in the annual reports of the majority of businesses.

Identification, measurement, and dissemination of information to interested parties concerning human resources constitute the process of human resource accounting. According to Okpala & Chidi (2010), a well-developed system of human resource/capital accounting could significantly influence management’s internal decisions as well as investors’ external decisions. Human resource accounting is concerned with quantifying the financial value of the human resources used by an organization.

One of an organization’s intellectual assets is its human resource. Strategic thinking is the new essence of human resource management. Organizations are now looking more and more on intellectual capital, and by extension, human resources, as the special asset that can lead to superior performance as a result of the business environment’s rapid changes. In order to achieve “continuous improvement” for the business, the strategic use of human resources can result in a steady stream of improvements in all areas of customer value, including quality, functionality, and timely delivery. The learning curve effect in strategic management accounting aids in lowering labor expenses directly while lowering incidentally other costs associated with labor (such as material costs).

The abilities, qualities, perceptions, and character of the employees play a significant role in the effective and efficient utilization of the physical assets (Knauf, 2011). According to the America Accounting Association (2003), the act of gathering and disseminating data pertaining to human resources is known as human resource accounting (HRA). Human resource accounting was first suggested historically in the 2000s in an effort to include employees on the balance sheet, and it became a well-known research topic in the 2000s.

According to Flamholz (2009), the major functions of HRA are to persuade decision-makers to embrace it and to educate businesses of the cost of hiring more employees. Despite this field’s study, there are a few reasons why HRA is not commonly used in practice. These concerns range from whether it is appropriate to measure personnel to whether they may be classified as assets.

A component of the human resources system is employee training. Businesses must also make the most of their employees’ strengths and skills by supporting individual growth and fostering an atmosphere that allows knowledge to be developed, shared, and applied to business objectives (Appah, Tebepah, and Soreh, 2012). Return on assets (ROA), return on equity (ROE), and earnings per share (EPS) are all ways that businesses can measure their performance.

According to Bassey & Tapang (2012), many firms in the modern economy have identified human resources as one of their key sources of competitive advantage. Particularly diversified and with a strong emphasis on human resources as having a unique strategic value for organizational development is the private sector. According to Abdullahi & Kirfi (2012), quantifying the value of human resources enables management to adapt to changes in their quantity and quality and reach a balance between the resources that are available and those that are needed. As a result, it is crucial to implement methods to manage people in a way that meets their needs and expectations in order to increase productivity. Managers will therefore be able to make wise judgments on the investment in human resources if they have a proper understanding of human resource accounting. Additionally, it will offer comparative data on the expenses and advantages of investing in human resources.

1.2 Problem Statement

Although the concept of accounting for human resources has been around for a while, it is still not widely accepted (Bowers, 2003). On how to value and account for people within a business in its financial statements, numerous authors and academics have performed research.(Bowers, 2003; Flamholz, Bullen, & Hua, 2002; Hermannson, 2004; Schulz, 2001; Likert, 2007).

In Nigeria, corporate entities are still in the early stages of developing accounting and reporting systems for human resources. Unilever Plc, Nigeria Breweries, Cadbury Nigeria Plc, Nestle Foods Nigeria Plc, Access Bank Plc, and Zenith Bank Plc are a few of the businesses that have substantially invested in human resources and used human resources accounting in Nigeria in one form or another. These businesses typically expense their investments in human capital development in their profit and loss statements rather than having them appear as assets on their balance sheets. Micah, Ofurun, and Ihendinihu (2012); Okapla & Chidi (2010). The main obstacles to recognizing human resources as an asset are generally related to their qualities, monetary valuation, and reporting procedures.

1.3 Study’s objectives

This study’s main goal is to determine how human resources accounting methods affect Nigeria’s industrial industries’ performance.The exact goals of this research project include the following, with special reference to Nigerian Brewery Plc’s 9th mile Conner Enugu.

1. To investigate how human resources accounting affects Nigerian manufacturing enterprises’ performance.

2. To assess the contribution of human resources accounting to the growth of the Nigerian industrial sector.

3. To investigate the connection between human resource accounting and the monetary success of Nigerian manufacturing firms.

4. To determine the difficulties with accounting disclosure for human resources in Nigerian manufacturing firms. Moreover, suggest any potential fixes for the issues you’ve noticed.