Human Capital: A Strategic Asset Whose Time Has Come to Be Recognized on Organizations' Financial Statements
Author | Charles K. Braun,Marc Sollosy,Marjorie McInerney, |
Date | 01 October 2016 |
Published date | 01 October 2016 |
DOI | http://doi.org/10.1002/jcaf.22201 |
19
© 2016 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI 10.1002/jcaf.22201
f
e
a
t
u
r
e
a
r
t
i
c
l
e
Human Capital: A Strategic
Asset Whose Time Has Come to
Be Recognized on Organizations’
FinancialStatements
Marc Sollosy, Marjorie McInerney, and Charles K. Braun
INTRODUCTION
How often in
industry does a
company proclaim
“our people [human
capital] are our most
valuable asset” or
“our most valuable
assets wear shoes”
or similar platitudes?
The question arises:
Are people really an
organization’s most
valuable asset? In
reality, not neces-
sarily; in fact, some
are liabilities—but
some undoubtedly
are the most impor-
tant drivers of value
that an organization
has. This sentiment
seems common in
the 21st-century
economy, particu-
larly among those
industries and
companies whose
product or service
offering is based
on human capital,
rather than tradi-
tional manufactur-
ing. However, little
has been done to
actually capture the
value of this asset.
In the highly com-
petitive economic
context of the day,
with such phenom-
ena as globalization,
rapidly evolving cus-
tomer demands, and
increasing competi-
tion, people and the
way organizations
attract and man-
age them becomes
far more important.
This is particularly
true because many
of the other, more
This article examines the issue of how organizations
value human capital—are they treated as the intellec-
tual resource within the asset side of the ledger, or are
they an expense that drains the company of cash and
risks their competitive advantage? The article will focus
on the idea that the value of the human capital assets
should be measure and considered part of the organi-
zations market value. The exploration of knowledge-
based economies has strengthened the argument for
setting value to those producing creative and innovative
processes within the organization. Central to this article
is the belief that human capital is an accountable asset
that must be valued on corporate financial statements
as Infosys has adopted since 2008. While some would
argue that financial value cannot be attached to labor,
this argument does not seem to be supported in the
knowledge-based economy. If an organization’s most
valuable asset is its people, then the argument must be
broached that accounting standards (such as the Finan-
cial Accounting Standards Board [FASB] and generally
accepted accounting principles [GAAP]) should keep
current with the 21st century. If a true comparison of
organizations takes place, can that comparison ignore
its human capital? © 2016 Wiley Periodicals, Inc.
Editorial Review
To continue reading
Request your trial