Imapct factor(SJIF): 5.889
Measuring Factors Affecting Adoption of HR Valuation: Manager’s Perception
Nader Naghshbandi, Vineet Chouhan and Hamid Saremi
Nader Naghshbandi, Young Researchers and Elite Club, Quchan Branch, Islamic Azad University at Quchan, Iran.
Dr. Vineet Chouhan, Assistant Professor, School of Management at Sir Padampat Singhania University, Bhatewer, Udaipur. Rajasthan, India
Dr. Hamid Saremi, Department of Accounting, Quchan Branch, Islamic Azad University at Quchan, Iran
Humans are the most important assets for the business and their valuation is an important part of internal growth and success of the business. It is important for a company to analyze, give importance and value HR. for this purpose the perception of the managers (General Managers/ managers) is important and in this paper the perception of managers working in Indian and global companies is measured and analyses. The current research has highlighted the factors affect adoption of HRA and predict organizations performance. For this purpose the data from 100 manager’s respondents were gathered from 15 companies operated in India and abroad. The companies were selected for the purpose of current study on the basis of invested capital. The data analysis methods were Chi-square tests and Multiple Regression method for identifying that weather respondents’ have a positive perception about the use of HRA. Since the perception of managers is treated as an evidence for wealth creation, it is proposed that managers of Indian and global companies should adopt HRA.
Keywords: HR, HR Valuation, Adoption HR, Manager’s Perception, multiple regressions.
Corresponding author’s email: firstname.lastname@example.org
The American Accounting Society Committee on HRA defines HRA as the process of identifying and measuring data about human resources and communicating this information to interested parties.” In simple terms, it is an extension of the accounting Principles of matching costs and revenues and of organizing data to Communicate relevant information in financial terms.
Human Resources & Valuation of Intangible Assets consist of a variety of components such as machinery, real estate, financial resources, and other such “tangible assets.” Companies also possess other abilities, beyond the tangible assets, to create, innovate, and persuade consumers to buy from them instead of a competitor in the same industry (Ulrich and Smallwood, 2004). The under reporting of intangible assets, such as human resources, effectively leaves behind a significant amount of shareholder wealth and contributes to the company’s higher cost of capital. Both of which, can be remedied if company’s focused on their greatest assets, the intangible assets, studied them, monitored them, and invested in them for the maximum shareholder return. Furthermore, companies need to establish the way or means to actually account for the investment in their intangible assets where an industry could agree upon much like the Generally Accepted Accounting Procedures as it pertains to financial reporting.
The reviews of the literature on HRA and its adoption practices are presented in table-1 as under:
Table-1: Review of literature
The research methodology of this study is divided in following points:
The sample of 15 companies from India and across the globe was taken for the present study. The current practices of the selected companies are shown in table-2 as under:
Table-2: Companies disclosing some other points relating to HR with values (Year 2014)
The current method of HRA adopted by the companies selected are enlisted in table-3 as under:
Table-3: Human Resource Accounting Practice in selected companies
For the purpose of current study variables were identified from the reviews of literature. These variables with their SPSS code were enlisted in table -4as under:
Table -4: Variables with SPSS Code
Results and Discussion
As per the objective of the paper the perception of managers regarding use of HRA were seek. This part is essential since it is important to know that whether they have a positive perception about the use of HRA. For this purpose some variables were identified from the reviews of literature.
The major benefits of this step were to provide the variables which may be used as the critical success factor for successful implementation of HRA. The following hypothesis was developed:
H0: There is no significant difference in the perception of managers regarding use of HRA.
H1: There is a significant difference in the perception of managers regarding use of HRA.
To identify key variables in use of HRA multivariate regression analysis has been used with SPSS-19 software and results were shown in table -5 as under:
Table-5: Multiple Regression Analysis
Predictors: (Constant), V_1, V_5, IMP_5, IMP_3, IMP_4, IMP_1
Dependent Variable: IMP
The final Regression model with 6 independent variables (V_1, V_5, IMP_5, IMP_3, IMP_4, and IMP_1) explains almost 76.1% of the variance of accounting managers perception on use of HRA in India and Abroad. Also, the standard errors of the estimate has been reduced to .25252, which means that at 95% level, the margin of errors for any predicted use of HRA can be calculated as ± 0.4949392 (1.96 X .25252). The six regression coefficients, plus the constraints were significant at 0.05 levels. The impact of multi colinerarity in the 6 variables was substantial. They all have the tolerance value less than 0.416, indicating that only over 58% of the variance is accounted for by the other variables in the equation. The impact of individual contribution of the selected 6 variables under Standardized Coefficients i.e., Beta with t values and significant values (<0.05) was shown in table-4. While other variables in part g. i.e., Excluded Variables were removed from the equation due to insignificant impact (>0.05). The ANOVA analysis provides the statistical test for overall model fit in terms of F Ratio. The total sum of squares (26.440) is the squared error that would accrue if the mean of HRA Adoption has been used to predict the dependent variable. Using the values of V_1, V_5, IMP_5, IMP_3, IMP_4, and IMP_1these errors can be reduced by 77.57% (20.510/26.440). This reduction is deemed statistically significant with the F ratio of 53.607and significance at level of 0.000f. With the above analysis it can be conclude that six variables i.e., V_1, V_5, IMP_5, IMP_3, IMP_4, and IMP_1 explains the perception of Managers for the successful adoption of HRA. This analysis revealed that importance and valuation were the two important variables behind the adoption of HRA as per the managers.
To identify the Effect of budgetary allocation for employee training was found to be Inverse, remain constants or positive in selected organization the responses were taken and to test the differences in the perception and following hypothesis were made:
H0= There is no difference in the impact of employee training for HRV training regarding budgetary allocation.
H1= There is a significant difference in the impact of employee training for HRV training regarding budgetary allocation
To identify the significance of the difference one sample t test was applied with SPSS-19 software and the results have been shown in table-6 as under:
Table-6: One-Sample Test
The output of the ‘one sample t test’ in the table 5.12 reveals that significant gap exists between the hypothesized test value with the calculated sample statistics for impact of employee training for HRV and its budgetary allocation (t =13.681at p= 0.000<0.05) at 5% level of significance. The respondents have exhibited a fair amount of agreement that there is a significant difference and as the mean were above 2 (2.6000) the maximum respondents have shown positive impact of budgetary allocation.
To identify the type of welfare amenities to be affected in selected organisation the responses were gathered from the respondent and the following hypothesis was developed:
H0= the organisation were insignificantly affected by welfare amenity.
H1= Welfare activity has significant impact on selected companies.
To analyze the above hypothesis the chi-square test for goodness of feet is being used. The result of chi-square test has been shown in table-7 as under:
Table-7: Chi-Square Test
The actual result of the chi-square test is shown under Table-7 which revealed that in the 5 welfare activities test statistic was statistically significant in Chi square (χ2)= 56.200a, p< 0.05. Therefore, we can reject the null hypothesis and conclude that Welfare activity has significant impact on selected companies. With the responses it also seems that subsidize canteen facility and provision for health care were the two main reasons for making an impact over the companies while transport facility has no impact.
To identify that the impact of HRV on promotion policies and Merit based promotions were provided in the organisation using HRV, the Chi square test were conducted by developing the following hypothesis:
H0= HRV has no impact over promotional policies.
H1= HRV has significant impact over promotional policies on selected companies.
To analyze the above hypothesis the chi-square test for goodness of fit is being used. The result of chi-square test has been shown in table-8 as under:
Table-8: Chi-Square Test
The actual result of the chi-square test is shown under Table-8 which revealed that Impact of HRV on welfare activities the test statistic was statistically significant in χ2 = 36.200a, p (0.000)< 0.05. Therefore, we can reject the null hypothesis and conclude that HRV has significant impact over promotional policies on selected companies.
To check the level of management on which HRV was likely to affect supervision and control responses were gathered from the managers. To test the significance level of the above chi-square test for goodness of feet was being used. The following hypothesis was developed:
H0=There is no difference in the level of management on which HRV affect the Supervision and control
H1=A significant difference exist between the level of management on which HRV affect the Supervision and control
To analyze the above hypothesis the chi-square test for goodness of feet is being used. The result of chi-square test has been shown in table-9 as under:
Table-9: Chi-Square Test
The actual result of the chi-square test is shown under Table-9 which revealed that in the test statistic part that in case of top and middle management the hypothesis was statistically significant in χ2Top= 84.860, p=0.05>0.000; χ2middle= 58.460, p =0.05> 0.000 while it was statistically insignificant in case of supervisors as χ2supervisor= 0.360, p =0.05<0.549. Therefore, we can reject the null hypothesis and conclude that significant difference exists in the opinion of the top and middle level of management while in case of supervisor no difference exists and they were clearer that HRV affect the Supervision and control.
Assets are resources from which future economic value will flow to the entity. As an employee of an organization will not merely work for a single year, it seems rational to account for employee as an asset in the balance sheet on the ground that they will provide future economic benefit to the entity. Moreover, charging the cost of recruiting, Training and Development of the employee in the profit and loss account for a single period goes in contrary to the expense recognition principle of accounting. Like other physical assets as the incurrence of these costs gives benefit through more than one fiscal period, amortizing these costs over the benefit deriving period is highly accepted. For this purpose and for successful implementation of the HRA in Indian and global companies it is important to measure it with the Managers positive perception. For this purpose some variables were identified and responses from 100 managers were received. Multivariate regression analysis has been used with SPSS-19 and final Regression model with 6 independent variables, V_1, V_5, IMP_5, IMP_3, IMP_4, and IMP_1 explained the variance of accounting managers perception on use of HRA in India and Abroad. The reason for disclosing HRA in accounts was that it should be helpful for accounting purpose. Further, managers (82 percent) believed that the profitability Objectives are likely to be affected by HR data in organization. The study also uncovers the fact that the respondents have exhibited a fair amount of agreement that there is a significant difference and positive impact of budgetary allocation, with a significant impact of Welfare activity on selected companies. The study also revealed that HRV has significant impact over promotional policies on selected companies. The significant difference was also found in the opinion of the top and middle level of management while in case of supervisor no difference exists and they were clearer that HRV affect the Supervision and control.
Further it has also revealed that until and unless a sophisticated and accepted model for valuing human capital is developed, it will be worthwhile to capitalize and amortize the cost of recruiting, selecting, formal training and, familiarization; informal training, informal familiarization. The amortization will be over the expected service period.
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