Infosys Technologies Ltd. - Accounting for Human Capital (A2)

Published 19 Jun 2007
Reference 5384
Region Asia
Summary

The case highlights the issue of human capital accounting. Corporation regularly argue that employees are their most valuable asset. However, when we look through the assets on the balance sheet, no amount is reported. Infosys Technologies believes that financial accounting does not do justice to corporation that heavily invest in people and as such started to provide supplemental financial disclosure that captures their best estimates of the value of their human capital. The case explores the methods for valuing this human capital asset and highlights arguments for and against the practice of capitalizing it on companies balance sheets.

Teaching objectives

Discuss the arguments that financial accounting does not capture the most relevant assets in a service economy such as brand and human capital. Highlight Infosys Technologies decision to start providing its financial stakeholders information about the asset of human capital and an attempt at its valuation using various methods that could be analyzed in classs.

Keywords
  • RD0507
  • AR0607
  • AR2007