PRACTICE OF HUMAN RESOURCE ACCOUNTING IN NEPALESE COMMERCIAL BANKS

Abstract

Human Resource Accounting (HRA) is a relatively new idea in accounting. It involves identifying and measuring the value of a company’s human resources. By measuring how much is invested in human resources, organizations can better understand the costs associated with their workforce over time. To improve organizational efficiency, it’s important to systematically evaluate the value of human resources and record this information in the financial statements. This way, the value of human resources can be communicated to the users of the financial statements as needed. The information provided by HRA helps management make informed decisions about future planning. In this context, it’s important to analyze how HRA is disclosed and practiced in Nepalese commercial banks and the impact of staff cost on profitability of commercial banks. The study measured HRA disclosure practices using five main indicators, which include three sub-indicators, and calculated the Human Resource Accounting Disclosure Index (HRADI). The results showed that Agriculture Development Bank disclosed 46.67% relevant HR information, Nabil Bank Limited disclosed 93.33%, Global IME Bank Limited disclosed 60% and Nepal Bank Limited disclosed 46.67% of relevant HR information in their annual Report. The Nabil Bank limited fully adopt the HRA while disclosure practice of HRA in other banks is not satisfactory yet. The study also showed the impact of staff or personnel expenses on profitability (ROA) of commercial banks. After reviewing the annual reports of ADBL, Nabil, GIBL and NBL, it was found that all banks follow the Nepal Financial Reporting Standard (NFRS) in preparing their financial statements. All four banks account for human resource costs under two categories: Personnel Expenses and Deferred Employee Expenditure. While this shows that banks partially account for their human resources, the true meaning of HRA; valuing human resources has not been fully implemented by banks except Nabil Bank in this study. Therefore, this study attempted to value the human resources of all four banks using the Lev and Schwartz Model.