Unit 4: Accounting for Capital and Contemporary issues in Accounting Introduction to contemporary issues in Accounting

 

1. Human Resource Accounting (HRA)

  1. Definition: HRA involves measuring and reporting the value of employees as organizational assets.

  2. Purpose: Recognizes humans as key economic resources whose value increases through training and development.

  3. Methods: Includes cost-based (acquisition costs) and value-based (present value of future services) approaches.

  4. Benefits: Helps in decision-making for hiring, training, and retention; improves transparency.

  5. Limitations: Difficult to quantify human value; lacks standardized methods and is not widely adopted legally.

2. Inflation Accounting

  1. Purpose: Adjusts financial statements to reflect the impact of changing price levels during inflationary periods.

  2. Impact on Assets & Profits: Traditional historical cost accounting distorts asset values and profits during high inflation.

  3. Methods: Includes Current Purchasing Power (CPP) and Current Cost Accounting (CCA) approaches.

  4. Relevance: Provides more realistic financial data and helps maintain capital preservation.

  5. Challenges: Complex calculations and low acceptance in many countries due to stable inflation environments.

3. Green Accounting (Environmental Accounting)

  1. Definition: Identifies, measures, and reports costs related to environmental conservation and sustainability.

  2. Scope: Includes costs of environmental protection, restoration, and impact on natural resources.

  3. Purpose: Encourages corporate social responsibility and helps evaluate environmental performance.

  4. Reporting Frameworks: Often uses tools like sustainability reports and environmental management accounting.

  5. Challenges: Lack of standardized principles; environmental impacts are sometimes intangible and hard to measure.

4. Accounting for CSR and Sustainability

  1. CSR Accounting: Involves identifying and reporting expenses and initiatives undertaken in line with Corporate Social Responsibility laws.

  2. Legal Framework in India: Applicable to companies meeting specific thresholds (as per Companies Act, 2013 – Section 135).

  3. Types of CSR Activities: Education, healthcare, poverty alleviation, environmental sustainability, gender equality, etc.

  4. Sustainability Reporting: Focuses on environmental, social, and governance (ESG) performance alongside financial data.

  5. Global Standards: Uses frameworks like GRI (Global Reporting Initiative) and integrated reporting to disclose CSR activities and sustainability efforts.

Scroll to Top