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Employee as an Asset

In: Business and Management

Submitted By asun90
Words 949
Pages 4
Employee, who is the company’s primary assets, is the secret in the sauce and the glue that holds the corporation together (Back, 2010). However, despite the importance of the employees, the companies do not include them as an asset in the balance sheet where all the other assets are being recorded (Kaye, 2012; McGrath, 2010). Employees are considered as an intangible asset to the company (Back, 2010).
There are some reasons why employee is not or should not be include in the balance sheet as an asset. Many intangibles such as employees are not owned by the company in the first place (Adams, 2010; Kaye, 2012). Adams (2010) also stated that, a company can only put assets for which it has a clear ownership right on its balance sheet where employees do not meet that test. Furthermore, since there is no financial transaction creating the intangibles, the dollar value of intangibles can be difficult to identify (Adams, 2010). In basic accounting, we can see that accounting entries are made when there is money involve such as when the firm buys something, money is deducted from bank and the expense get booked to an expense or investment (Adams, 2010). However in most cases, intangibles are created outside the monetary system. McGrath (2010) mentioned that, value is created when employees learn something, but other than the employee’s salary, there is no financial transaction.
Moreover, valuing employees or human capital is a very difficult task (McGrath, 2010; Weatherly, 2003). Weatherly (2003) also claims that, employees are simultaneously the greatest potential asset and the greatest potential liability that an organization has at any given time, making the calculation of the value of our employees is difficult. HIP Investor CEO, R Paul Herman argues, the challenge of formulating an assigned value to human beings, and even the risk that such figures could be...

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