Accounting for firms' training programs: an exploratory study

Abstract

Purpose

This paper aims to analyse two competing approaches to accounting for a firm's investment in staff‐training activities: the accounting and labour economics approach (which argues that no asset should be recognized from training activity); and the human resources management approach (which advocates recognition of an asset).

Design/methodology/approach

A case study analysis was conducted in two large Portuguese companies where human capital is said to be a critical factor of firm success. The authors used document analysis and interviews to help understand the training phenomenon from a company's point of view. This meant knowing of motivations, training programme curricula, training practices and expected benefits of training.

Findings

The paper identifies and defines two situations concerning a firm's investment in human capital training: one, where no asset (value) is generated; and the other, where the accounting definition of an asset, requiring value generation, is satisfied.

Research limitations/implications

Case studies possess the strength of specific instance detail and interpretation, and the ostensible weakness of interpretation of a small sample. But such research can provide for a reframing of conceptual perspectives. They can stimulate additional efforts to improve accounting and financial reporting.

Practical implications

A guideline system for firm investment in training was developed. This system allows different accounting treatments of a firm's investment in training activity. It proceeds on the basis of perceptions of whether training activity undertaken by a firm generates, or does not generate, value.

Originality/value

This paper provides a much‐needed case‐based empirical analysis of accounting and human capital arguments, and asset recognition arguments. It clarifies the situations in which an asset should be regarded as being generated by training expenditure.

Citation

Antunes Brás, F. and Lima Rodrigues, L. (2007), "Accounting for firms' training programs: an exploratory study", Journal of Human Resource Costing & Accounting, Vol. 11 No. 3, pp. 229-250. https://doi.org/10.1108/14013380710843791