IACCM Contract Management Forum

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2015-08-15 10:59:50

Is human resources an asset?

In accounting, we consider all types of tangible and intangible assets to calculate the net income and to measure the overall performance of the organization. But why human resources aren't consider as an asset? Whether human resources are the most productive factor of the organization. If we can consider goodwill as an asset why can't we consider skilled manpower as an asset?
I will be glad to know your answers
 •   2015-08-18 16:04:28
Human resources may be considered as a liability from the accounting/financial reporting point of view because of the overhead costs associated with its upkeep and maintenance. However in my opinion and from an overall business point of view - the skills, capabilities, experience and IP of the company's human resources can be considered an asset. No company can run efficiently and generate revenue without a competent pool of staff.
 •  Century 21 Vanguard  •   2015-08-18 18:46:50
Perhaps you can elaborate on your post. Are you talking specifically about contract management and its value?
 •  Management Web  •   2015-08-19 11:27:05
Thanks Katherine Kawamoto for your kind help,
The topic is elaborating for better understanding.
We know goodwill is considered as an asset but we can't calculate the exact value of it. We consider it as an asset because goodwill enhances the profitability of the organization.
We also consider preliminary expense as an asset for the contribution to gain profit.

At the same way skilled manpower also helps the organization to gain profitability. And it is the most valuable and productive factor for the organization. So why human resources or skilled manpower aren't consider as an asset to calculate the total assets in the balance sheet?

Thank You
Md. Amanullah
 •  NetApp  •   2015-12-02 09:38:51
You don't own your human resources. So you cannot present them on your balance sheet as an asset because your employees can quit any time they like. You can argue that it is different if you have labor contracts that bind people to your company for a certain period of time (football clubs do it), but if an employee wants to leave you should write off a lot of the value (motivation to deliver results will be gone) and it will not be easy to find a metric for that :-)

You are right in linking HR to goodwill. In practice, goodwill can hinge on one person (think: Steve Jobs). But then again, if you are a company whose goodwill is linked to one person, then you have a problem to fix.
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