News Details


Human Resource Accounting

List of news

1. Introduction
In August 2020, the US Securities and Exchange Commission (SEC) mandated the disclose of the human resource capitals by all listed companies. This new rule will accelerate the importance of disclosure of human resource capitals in organizations worldwide.
In today’s knowledge-based economy, especially in associated with the Tech Giants such as Google, Amazon, Facebook, and Apples, individual intangible expertise including personal intellectual assets, variable knowledge, and knowhow should be valued properly rather than considering individuals as workforce in companies.
In addition, the Japanese conventional practice of “borrowing knowhow (not receiving knowhow)” is now questioned from the point of proper valuation of “personal goodwill” in companies.

2. Human capital resources
Human capital resources are called aggregative human capitals such as individual knowledge, experience, and knowhow. The accounting standards are now focusing on how to measure such human resources and record them on the balance sheet for external reporting.
In finance accounting, assets are defined as “financial resources a reporting entity controls as a result of past transactions or events.
Also, in today’s accounting, human capital resources are included in goodwill and not allowed to record as a separate asset from other intangible assets.
Therefore, human capital resources are indicated not by the exact amount but through the information on non-financial statements.

3. Methods of fair evaluation of human resource capitals 
In cases where companies record human capital resources on financial statements or value them as a part of goodwill, they should be assessed in accordance with the “fair evaluation rule” under IFRS No.13. In IFRS No. 13, the fair evaluation is defined as the “price to be paid by the transfer of debts or the price to be received by the sale of assets under fair transactions among market participants on the measurement date.”
The three approaches for the fair evaluation are as follows:
Cost Approach
Market Approach
Income Approach

4. Conclusion
In this News, we mentioned “human resource accounting.” Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.

● “Human Capital Accounting Recognition ・Measurement・Disclosure” Kazuyuki Shimanaga  Doubunkan  2021

● US Securities and Exchange Commission HP :
 (Accessed on August 31, 2021)

● Financial Accounting Standards Board (FASB)
(Accessed on August 23, 2021)

● Accounting Standards Board of Japan:Conceptual Framework for Financial Accounting(December 28, 2006))

● IFRS No.13_Fair Value Measurement