Human Assets On The Balance Sheet Essay

Human Assets On The Balance Sheet Essay

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Human assets and whether there should be a value on humans has been a controversial issue in the recent years. Some individuals have argued that humans could be classified as assets because humans are a valuable resource of a business and placing value will help indicate importance to managers in order to cultivate the asset. However, others may object to the idea that humans are assets as this could be seen as demeaning; being listed alongside other business assets including inventory, plant and machinery. This essay will examine the issues around the inclusion of human assets on the balance sheet and will analyse the difference between the types of assets comprising of tangible and intangible assets.
An asset is a resource with financial value that the firm possesses or control; assets increase the value of the firm and generate cash flow. Assets also include tangible and intangible assets. Intangible assets are resources that are not physical in nature, these include intellectual property including patents, copyrights and brand recognition. Human capital could be seen as an intangible resource as individuals have the abilities and have the skill set, thus others argue that you cannot own employees’ abilities and control employees. Some firms recognise the importance of a capable workforce, Google for example in 2014 reportedly ‘invested $14 million’ within their training (Forbes, 1). This demonstrates that the employees are important but moreover the expertise and innovative ideas that the employees possess are vital within the firm. The importance of the intangible asset of expertise are cultivated and acknowledged within firms like Google. The expertise and recruitment of highly skilled employees could be incredibly difficult...

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...s provide to the business, add great value and are vital to the future success of the business. Therefore, the importance of intangible assets such as employee’s expertise would be seen as an asset, hence the business do not have ownership of the employees. Consequently, the business cannot place a value and class employees as ‘human assets’ on the balance sheet. However, whilst it is important to consider a workforce as an intangible resource, some individuals believe human assets could meet the conventional definition of a tangible asset for inclusion on the balance sheet. A possible method is prepayments of wages within the balance sheet. At present, we have seen that employees are not accounted for on the balance sheet and would possibly remain this way in a long time as measuring and valuing the worth of employees would not be a straight forward decision.

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