JOURNAL ARTICLE

How Financial Accounting Screws Up HR.

  • Published In: Harvard Business Review, 2023, v. 101, n. 1. P. 38 1 of 3

  • Database: Business Source Ultimate 2 of 3

  • Authored By: CAPPELLI, PETER 3 of 3

Abstract

The article examines how U.S. financial accounting standards, based on generally accepted accounting principles (GAAP), distort business decisions related to human capital by treating employees and investments in them as expenses or liabilities rather than assets. This accounting approach discourages companies from investing in employee training and development, encourages reliance on leased or nonemployee labor, and contributes to shifts away from defined-benefit pensions toward defined-contribution plans. These practices negatively affect operational efficiency, employee engagement, and long-term business value. The article advocates for modest changes in reporting requirements—such as disclosing spending on nonemployee labor, training, turnover rates, and internal hiring rates—to provide clearer information for investors and promote better human capital management.

Additional Information

  • Source:Harvard Business Review. 2023/01, Vol. 101, Issue 1, p38
  • Document Type:Article
  • Subject Area:Business and Management
  • Publication Date:2023
  • ISSN:0017-8012
  • Accession Number:160701544
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