People Management, the journal of the Chartered Institute of Personnel and Development (CIPD), provides an example of the importance of accounting information to human resources (HR) professionals.The article touts the oft-cited expression ‘people are our greatest asset’, but questions how many HR professionals appreciate the full costs of people in an organization.

According to Vanessa Robinson of the CIPD, HR professions shouldn’t merely say ‘people are our greatest asset’, but look at the income statement and see what they cost! The problem is that many HR professionals may not have sufficient basic accounting knowledge to understand basic accounting principles. They need to be familiar with the basic financial statements – the income statement, statement of financial position and the statement of cash flows – as well as understand basic cost concepts. What this article tells us is something we as accountants already know – that accounting is a communication medium, a language indeed, that not everyone understands. Having said that, while HR professionals may not think they require fluency in accounting, they do need to make business decisions which are underpinned by sound financial information, e.g. recruit and retain staff. Having an understanding of accounting information (rather than just accepting it from the accountants) will benefit HR and other professionals in an organization.

Questions 

1 What kind of accounting information would you communicate to HR professionals?

2 What format would you use?