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An analysis of the idea of measuring and reporting human capital in the balance sheet - Essay Example

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The companies illustrate employees as liabilities bearing in mind that human capital is the biggest asset of any company (Stewart 1994, pg. 250). The financial reports show wages and other earnings of the…
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Companies including human capital will improve the companies’ goodwill in the external and internal environment. The political economy of the firms will improve when the company illustrate its relationship with different skilled employees since the society will appreciate the move by the firm to treat its employees in the best ways possible since they are part of the society. The company that includes training of its employees in the financial reports creates better coexistence with the government thus increasing their good reputation and in return generate more profits since the government helps it in training and developing employees who are skilled to produce quality goods (Blair 1999, pg. 43).
It is important for a company to include equity to portray it does not discriminate against the physically but skilled employees or recruits creates a better image that will shape the scope of the market stock prices. Gender equality will portray better correlation with the society, which is important in expanding their company on its improved goodwill (Wyatt & Frick 2010, pg. 213). The inclusion of human capital in a financial report is very beneficial to firms thus this essay shows the reason behind exclusion of such a beneficial factor in the financial reports of most companies.
Financial reports are responsible to portray the company’s financial activities and the best way the company is able to allocate its resources. This information is important to the shareholders or investors, competitors and the society. The shareholders who invest money in the company should have the knowledge of the composition of the employees the company operates with to ensure they make justifiable judgments on the funds to invest (Sveiby 1997, pg. 137). If the company prove that, the employees are talented, innovative, skilled and self-motivated, the shareholders will invest more funds since they are sure the employees at hand will generate more profits making the ...Download file to see next pagesRead More
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