ANÁLISIS DE COSTO DE LA SITUACIÓN ACTUAL DEL PROCESO

Many organisations across the world today are inclined to, and indeed are often legally obligated to report information about HC. As Taymoorluie et al. (2011) noted two thirds of the 250 largest

companies in the world issue sustainability reports, including HCI, together with their financial statements in 2007. A leading audit firm; KPMG (2011), revealed that 95% of the 250 largest companies issued sustainability reports in 2011. Thus it is clear that today reports about HC have become prevalent in business practice.

Though there is a wide-spread interest in reporting HCI, there have been few significant attempts to define what reporting on HCI means. Abeysekera (2008a) notes that until 2007, there were no clear definitions relating to the theme “reporting”. Foong, Yorston, and Gratton (2003) state that there is an absence of a universally agreed defining for the term HC reporting. As an example of this lack of clarity, in 2003, instead of providing a definition, the Accounting for People Task Force (2003) recommended that external reporting should reflect the understanding of the Board of Directors about the relationship between HC management policies and practices and business strategy and performance. Foong, Yorston, & Gratton have provided a common sense orientation to

organisational reporting by noting that: "The fundamental objective of corporate reports is to communicate economic measurements of, and information about, the resources and performance of the reporting entity useful to those having reasonable rights to such information" (2003, p. 15). Based on a definition given in the Australian Accounting Handbook, Abesekera (2007), defined the reporting as providing necessary information required to users who are unable to command the preparation of reports and satisfy their information needs. Baron and Armstrong have defined it as “providing information to external stakeholders on how well the human capital of an organisation is managed” (2007, p. 34).

Despite the meaning of the term, organisations appear to report a wide variety of HCI to stakeholders. This reporting is due to regulatory requirements (Abeysekera, 2008b), however, interestingly, some relevant HCI is reported voluntarily (e.g. Beattie & Smith, 2010). The next section describes two categories of reporting; mandatory reporting and voluntary reporting.

Mandatory reporting versus voluntary reporting

With the intention of ensuring unique reporting practices in organisations within the European Union, the 4th Council Directive of the European Community in 1978 set the guidelines for the contents that should be included in financial statements. In terms of HC, the council required organisations to disclose only a limited range of information on employees. This included such information as salaries, wages, and for some countries, number of employees (European Economic Community, 1978). Thereafter, in order to achieve a unique level of reporting, the European Commission took further action to develop a set of requirements for accounting, to be called the

International Accounting Standards (IAS). The responsibility for preparation and administration of IAS was given to the International Accounting Standards Committee (IASC).

The aim of preparing the IAS was to provide guidelines for good reporting practice (Donnelly, 2007), applying especially to publicly listed companies. When dealing with an intangible resource like HC, a number of standards were issued by IASC which include IAS 19, applying to Employee Benefits, IAS 26 to Retirement Benefits Plans, and IAS 38 to Intangible Assets. Of these three standards, IAS 38 provides a definition of intangible assets and prescribes appropriate accounting and reporting treatments (International accounting standards Board (IASB), 2012). IAS 38 presents the definition of intangible assets as “an identifiable non-monetary asset without physical substance” (International accounting standards Board (IASB), 2012, p. 1). Accordingly, to be defined as an intangible asset, an asset needs to possess attributes such as an ability to be identifiable and exchangeable, to be controlled, to gain future economic benefits and to have a measurable cost. HC somewhat fits the last criteria, measurability of the cost of the asset, as the cost of employment can be readily identified and quantified. However, people cannot be exchanged at will, cannot be (completely) controlled, and cannot provide guarantees about the future economic benefits that can derive from employees. Thus, from a regulations point of view, human capital does not meet the above criteria, and therefore, cannot be considered an intangible asset. Hence, IAS 38 prescribed in the accounting requirements the writing off of all the expenses incurred for employees against profits. Adhering to this regulatory requirement, organisations today therefore write off all expenses incurred for employees against the profits.

In addition to accounting standards, many other legislative bodies such as law (e. g. Companies Act and Banking Act), Census and Statistics and exchange listings impose requirements on organisations. These often require the reporting of numerous categories of information about HC. For example, in Singapore, the reporting of directors’ educational qualifications is mandatory (Abeysekera, 2008b). However, many studies in the field seem to have ignored the mandatory reporting aspect while conducting their investigations (April, Bosma, & Deglon, 2003; Bozzolan, Favotto, & Ricceri, 2003; Brennan, 2001; Guthrie & Petty, 2000). Abeysekera (2008b) states that it is worth ignoring

mandatory reporting due to its compulsory nature. The level of organisations’ motivation to report can be examined only through voluntary reporting. As Guthrie, Petty, Ferrier, and Wells (1999) stated, many studies have been conducted with the purpose of understanding the voluntary nature of reporting, and not to understand compulsory reporting.

Thus, researchers have been inclined to believe that reporting HCI is largely unregulated and the current extent and the level of reporting of HCI in financial statements or elsewhere is an

organisation’s decision (Abeysekera, 2008c). Consequently, a plethora of studies have been

conducted on voluntary reporting practices of organisations (Abeysekera & Guthrie, 2004; Beattie & Smith, 2010; Berkowitz, 2001; Foong et al., 2003; Hoff Macan & Highhouse, 1994; Westphalen, 1999; Wickramasinghe & Fonseka, 2012 and several others). Many of these studies were not only focused on the level of reporting HCI in organisations but also argued as to whether HC should be reported in corporate financial statements (Canibano, Garcia-Ayuso, & Sanchez, 2000).

As noted above, reporting of some HCI is mandatory. However, there is an increasing trend among organisations to report extra information in addition to mandatory information (Marr, Gray, & Neely, 2003). As Ax and Marton (2008) stated, organisations tend to report much information voluntarily. Voluntary reporting can include staff health, job satisfaction, education, training,

recruitment, careers and compensation, revenues and employees. Mouritsen et al.,(2004) outlined a list of HC variables, including training and development, absence, employee satisfaction and staff turnover. The following section reviews the literature in order to understand why organisations tend to report HCI voluntarily.

Incentives and disincentives of reporting human capital information

Research has suggested that external stakeholders (e.g. investors, analysts, various members of the public, government, taxpayers, and grant givers) respond positively to organisations that report on HCI (García-Ayuso, 2003). The Accounting For People Task Force (DTI, 2003) argued that some stakeholders are keen on financial return, but a more important consideration is the non-financial performance, value for money and assurance of the best return for the investment that they have made. Through reporting information about HC, such as how organisation treat their employees, stakeholders may have a better means of assessing the value of organisations (Guthrie, Petty, & Ricceri, 2007). Providing more information reduces the uncertainty that stakeholders face in decision making. Thus, it is a viable option to provide information about intangibles like HC, since it gives a better view of the position of an organisation, which may perhaps lead to a higher share price (Canibano et al., 2000; Marr et al., 2003). Especially for knowledge based organisations, investor decisions may be substantially influenced by HC reporting (Canibano et al., 2000).

Jassim (2007) and Memon et al. (2009) claim that the foremost source of competitive advantage is a firm’s HC. Physical and other organisational resources can easily be copied by other organisations, but HC cannot be translated or copied directly; thus, an organisation always strives to recruit skilled, knowledgeable people and develop them. This investment in their employees is focussed on gaining their maximum contribution, in an effort to succeed against their competitors. Through reporting employee related information such as the benefits they can gain and how the company treats

employees, an organisation could attract potential employees over competitors. Stakeholders are likely to evaluate and compare alternatives and chose a firm that appears to offer a higher degree of protection for their investment (Yazdani (2008) as cited in Memon et al., 2009, p. 4182). Assurance that a firm values its employees and invests in the training and support of its work force may be instrumental in making an investment decision. Further, reporting on employee status is also likely to improve employees’ levels of morale, motivation (Guthrie et al., 2007) and trustworthiness (Van der Meer-Kooistra & Zijlstra, 2001).

Furthermore, reporting information on HC is a valuable tool for communicating with stakeholders and presenting a better image of the organisation’s vision and growth potential (Van der Meer- Kooistra & Zijlstra, 2001). Reporting on HCI could thus be useful as a marketing tool that not only highlights the power and resources of an organisation to interested parties (Van der Meer-Kooistra & Zijlstra, 2001), but also can secure and enhance the image of an organisation (Guthrie et al., 2007). This enhances the ability of the firm to attract potential customers (Bismuth & Tojo, 2008).

In addition to the above noted incentives, Abeysekera (2008c) revealed a different reason for reporting on HC, that is, to reduce the tension which comes from stakeholders of organisations. Abeysekera (2008c) argues that stakeholders put great pressure on organisations in a variety of ways and one way of reducing this tension is to report information about HC. For example, governments may put pressure on organisations to hire underutilised yet highly educated workers in order to reduce the drain of the country’s foreign exchange lost to buying non-domestic technologies expertise (Abeysekera, 2008a). Such government pressure has led to organisations using the reporting of information to communicate that they are keen on uplifting domestic employees through providing training and development, rather than hiring foreign expertise.

The above discussion explains that the benefits of reporting accrue not only to external parties but also to the organisation itself. As a result of the above-noted incentives, numerous guidelines have been developed for reporting and to encourage more voluntary disclosure (Bismuth & Tojo, 2008; Guthrie et al., 2007). More specifically, this practice is widely used in organisations in developed nations like many of those in the European community, Australia and Japan (Bismuth & Tojo, 2008; Guthrie et al., 2007).

In contrast, some research has highlighted the drawbacks of the reporting on HC (Foong et al., 2003; Marr et al., 2003; Van der Meer-Kooistra & Zijlstra, 2001). Organisations often do not want to report a greater volume or range of operational information because they see this resulting in

Holland (2003) stated that, since the nature of HC is intangible, it is often difficult to define, identify, categorise, measure and report. Foong et al. (2003) explored possible obstacles to reporting on HC, arguing that HC characteristics could involve sensitive information and hence should not be shared externally. They further stated that “human capital information may give important insight to competitors or potentially could be negatively interpreted by external stakeholders such as financial analysts, unions, employees” (p. 31). Thus, organisations may believe that reporting HCI is too commercially sensitive, and therefore would not be appropriate for external reporting. Other scholars such as Canibano et al. (2000), Holland (2003) , Marr et al. (2003), Van der Meer-Kooistra & Zijlstra (2001) hold similar views.

In addition to the commercially sensitive issue, reporting beyond minimal requirements demands that organisations incur considerable costs in both time and financial expenditure to prepare their reports. Providing additional information indeed incurs additional cost; thus the additional financial burden accompanying the HCI question discourages organisations from reporting on HC (Marr et al., 2003; Van der Meer-Kooistra & Zijlstra, 2001).

Further, information in financial statements is often open to manipulation, with those writing the reports striving to present the contents in a way that will leave a favourable impression. It is rational that organisations want to report only information that gives a positive picture of the firm (Van der Meer-Kooistra & Zijlstra, 2001). Since organisations are reluctant to publish information that paints a negative picture, and since it is possible to "creatively present" potentially negative information, it is not rational to expect that investors will have strictly accurate information with which to make quality decisions. The decision an investor makes could very well be biased, based on an incomplete or misleading presentation of a company's profile (Van der Meer-Kooistra & Zijlstra, 2001).

Moreover, Johnson (2002) claimed that it is not right to report information about HC in financial statements because HC is not legally owned by organisations. Since reporting HCI is likely to include both incentives and disincentives, organisations have to compare the overall cost of reporting with the possible benefits, and then decide on what they should report and to what extent (Marr et al., 2003).

In summary, the above discussion of the literature provides an understanding of three individual yet connected concepts; measuring, managing and reporting on HCI. In particular, it explained how these concepts evolved, the reasons organisations perceive these concepts as important, and how these concepts are put into practice in organisations. Researchers have invested a good deal of effort in developing and understanding these concepts. However, some have criticised the

development and utilisation of these ideas, pointing out that there are substantial variations in prior findings and therefore calling for more work to be done to develop the field of research (Castro, 2014; Dumay & Garanina, 2013; Guthrie et al., 2012). The following section will review published studies and then highlight one area in particular that has not attracted significant attention from HC researchers.