Human Capital Architecture and its Utilization in Accounting

Abstract

This chapter provides an alternative method of measuring and disclosing human capital items in financial statements. First, we explain the necessity of properly disclosing human capital information in financial statements. We then go on to define and classify human capital within our theoretical framework; sort out human capital investments according to cost development stages in human resources; isolate human capital from expenses; and suggest the proper method of disclosure in the financial statements. Finally, we show the results from an empirical study we performed to test the validity of the human capital architecture and its relationship with firm performance.