www.e-itt.uz
II SON. 2024
126
INVESTMENTS IN HUMAN CAPITAL: ACCOUNTING AND ANALYSIS
PhD, assoc. prof.
Ochilov Olmos Ikrom ugli
Tashkent State University of Economics
ORCID: 0000-0002-6882-0748
Abstract.
The article reveals issues of improving the accounting and analysis of human
capital and investments in business entities. The interpretation of investments in human capital
as an element of financial statements is explained and a methodology for their reflection in
accounts and reports is proposed.
Keywords:
accounting, accounting object, human capital, investments in human capital,
return on employees, return on investments in education, PESTLE analysis.
ИНСОН КАПИТАЛИГА ИНВЕСТИЦИЯЛАР: БУХГАЛТЕРИЯ ҲИСОБИ ВА ТАҲЛИЛ
PhD, доц.
Очилов Олмос Икром ўғли
Тошкент давлат иқтисодиёт университети
Аннотация.
Мақолада хўжалик юритувчи субъектларда инсон капитали ва унга
қилинган инвестициялар бухгалтерия ҳисоби ва таҳлилини такомиллаштириш
масалалари очиб берилган. Инсон капиталига инвестицияларни молиявий ҳисобот
элементи сифатидаги талқини ёритилган ҳамда уни ҳисоб ва ҳисоботда акс эттириш
услубиёти таклиф этилган.
Калит сўзлар:
бухгалтерия ҳисоби, ҳисоб объекти, инсон капитали, инсон
капиталига инвестициялар, ходимлар қайтими, ходимлар таълимига инвестициялар
қайтими, PESTLE таҳлил.
ИНВЕСТИЦИИ В ЧЕЛОВЕЧЕСКИЙ КАПИТАЛ: УЧЕТ И АНАЛИЗ
PhD, доц.
Очилов Олмос Икром угли
Ташкентский государственный экономический университет
Аннотация.
В статье раскрываются вопросы совершенствования учета и анализа
человеческого капитала и инвестиций в хозяйствующие субъекты. Объясняется
трактовка инвестиций в человеческий капитал как элемента финансовой отчетности
и предлагается методика их отражения в счетах и отчетах.
Ключевые слова:
бухгалтерский учет, объект учета, человеческий капитал,
инвестиции в человеческий капитал, рентабельность сотрудников, рентабельность
инвестиций в образование, анализ PESTLE.
UOʻK: 657.5:331.1(575.1)
126-132
www.e-itt.uz
II SON. 2024
127
Introduction.
Human capital is one of the most important objects of investing in business entities. On
the other hand, it plays a key role in business development. According to the World Bank human
capital is driver of development (Lange, Glenn-Marie; Wodon, Quentin; Carey, Kevin, 2018).
That is why governments also pay a great attention to enhance volume of investments in human
capital. For example, the President of the Republic of Uzbekistan Shavkat Mirziyoyev
emphasizes that ‘In developed countries, a lot of attention is paid to investing in the full cycle
of education, that is, investing in a child's upbringing from 3 to 22 years old. Because this
investment brings 15-17 times profit to the society. In our case, this indicator is only 4 times.
Therefore, we must pay more attention to human capital and mobilize all opportunities for this.’
(Address of the President of the Republic of Uzbekistan to the Oliy Majlis, 2018).
Recently, in world practice, special attention is being paid to the economic and social
importance of investments in human capital. According to the data provided by the World Bank
and the UN Development Program, natural resources and production capital make up 36% of
the world's national wealth, while human capital is up 64% (Goshunova A.V., 2014).
Accounting point of view, human capital is intangible assets which are not listed in the
balance sheet of the company according to current accounting standards. It can easily be seen
as the economic value of a worker's experience and skills. Any business unit can easily gain
targeted profit with a good team of employees. This is why they have to invest carefully in assets
like education, training, intelligence, skills, and other things employers look for. Employers
expect their employees to work hard and ensure good products in their company. A lot of
experts, businessmen and scientists believe that the more a company invests in employees, the
more productive and profitable they can be.
Literature review.
Human capital assessment and accounting problems appeared in the early 60s of the 20th
century with the formation of the theory of "human capital" by T. Schultz and G. Becker,
laureates of the Nobel Prize (Goshunova, 2014). The formation of this theory served as the basis
for recognizing human capital as an accounting object. In particular, E. Flamholtz was one of the
first to consider human capital as a resource of the enterprise and consider it an asset of the
company from the point of view of accounting. He singled out three criteria for recognizing
human capital as an asset: future economic benefit, ownership or control by an economic entity,
expression in monetary terms (Kulikova A.A., 2007).
Jac Fitz-enz recognizes human capital as an asset of the company and considers it a strong
financial lever, a valuable and productive resource (Jac Fitz-enz, 2006).
Chaikovskaya and Bystrova (2011), having researched issues of accounting and
evaluation of investments in human capital, defined human capital as follows: "Human capital
is the sum of assets and liabilities associated with highly qualified personnel" (Chaykovskaya,
Bistrova, 2011).
Theoretical issues of human capital are being studied by Uzbek scientists for a long time.
In particular, the scientists S.S. Gulyamov, K.Kh. Abdurakhmanov, A.V. Vahabov, B.Kh.
Umurzakov, A.A. Artikov, N.K. Zokirova, Sh.G. Akramova et al. have researched various aspects
of human capital recently (Ochilov, 2023).
Although human capital is being studied in depth by representatives of various sectors of
the economy, human capital and investments in it remain insufficiently studied as an object of
accounting. In this regard, only Polatov (2017) conducted partial research. In his papers on
accounting and auditing of intellectual capital, he studied human capital as a component of
intellectual capital and recognized the need to take it into account (Pulatov, 2017).
www.e-itt.uz
II SON. 2024
128
Analysis and results.
It should be noted that the recognition, assessment, analytical and synthetic accounting
of human capital or intellectual capital as an object of accounting and disclosure of information
about them in financial statements is a separate research topic. Having thoroughly studied the
scientific and research work on the account of investments in human capital, we would like to
dwell on the aspects that reveal its content as an object of account. When it comes to
investments in human capital, first of all, it is closely related to the concept of human capital.
After all, the question arises as to which object the investments are directed to. Before
considering whether or not investments in human capital are accounting objects of entities, we
need to clarify the question of whether human capital itself is an investment of entity or not.
According to Article 5 of the Law of the Republic of Uzbekistan "On Investments and Investment
Activities", investments are divided into capital, financial and social types by the intended
object (Law, 2019). Investments in the development of human potential, skills and production
experience, as well as in the elaboration of other forms of intangible assets, are included in the
social investments. Therefore, it is possible to invest in human capital and it can be an
investment object. Based on the analysis of the literature and scientists who have conducted
research on human capital and investments in it, the following conclusions can be made.
First, investments in human capital can be divided into four groups according to the
source of implementation. These are: by individuals, by family, by the enterprise you work for,
and by the state. Investments in human capital are made in these four directions.
Secondly, the purpose of economic entities investing in human capital is to gain economic
benefits in the future. These economic benefits can be systematized as follows (Figure 1).
Third, investments in human capital can take the form of any asset or expense. This is the
basis for considering investments in human capital in the form of accounting objects such as
assets, costs and liabilities.
Figure No.1 Economic benefits from investments in human capital
Source:
compiled by author.
Economic benefits of the enterprise from investments in human capital
Improvement of the quality of production and services
Increase in labor productivity, profitability and production efficiency
Increase in the efficiency of the use of means of production and working
time
New types of products and an increase in customers
More effective use of the potential of employees
Reducing the time needed to introduce new technologies
Reduction of costs of dismissal and search for new employees
Increased confidence of employees in the future of the enterprise
www.e-itt.uz
II SON. 2024
129
Based on the above-mentioned opinions and scientific conclusions made as a result of
research, investments in human capital are considered an object of accounting and the author’s
definition to the investments of human capital as an accounting object is as follows:
investments
in human capital are investments directed to human capital by economic entities in order to
obtain economic and social benefits in the future
.
There are two important points to note in the definition. The first is the purpose of
investing in human capital. We touched on this above and tried to explain its content. The
second aspect goes back to the concept of human capital. It is possible to invest in human capital
with a deep understanding of the concept.
It should be recognized that the theory of human capital is currently a subject of
interdisciplinary research, which gives rise to many interpretations based on the
characteristics of each discipline. From the formation of the theory of human capital to the
current stage of development, we found it appropriate to give a definition of human capital as
follows, having thoroughly studied the definitions and approaches given to the essence of this
concept.
Human capital is a set of physical, mental and entrepreneurial skills (competence) that
bring economic and social benefit to a person himself, his family, workplace and society.
It can be concluded that investments in human capital carried out by economic entities
should be aimed at developing human physical, mental (intellectual) and entrepreneurial
abilities.
Factors affecting the effectiveness of investments in human capital and their
determination are one of the important issues of modern management. Today, the evaluation
of the efficiency of the economic entities operating in our republic is carried out on the basis of
the "REGULATION on the criteria for evaluating the efficiency of the activities of joint-stock
companies and other economic entities with a share of the state". The following indicators
mentioned in this Regulation serve to evaluate the efficiency of human capital investments of
business entities (Regulation, 2015).
1. Labor productivity.
2. Training costs per employee.
3. Labour turnover ratio.
In fact, ensuring the stable pace of the indicators shown above directly depends on the
volume of investments in human capital and their rational use. However, since there is no
functional relationship between the increase in the volume of investment in human capital and
the change in the above indicators that ensure its effectiveness, we are not able to calculate the
effect of each factor separately. However, we can calculate the impact of sales profitability,
return on investment in education and investment in education per employee on employee
profitability (sum of profit per employee), which is considered as the most basic indicator for
assessing the profitability of investments in human capital, based on the following functional
relationship.
Р
х
= Р
с
∗ ТИ
қ
∗ ТИ
б
(1)
Hereafter:
Р
х
– employee profitability;
Р
с
– sales profit;
ТИ
қ
- return on investment in
education;
ТИ
б
– investment in education per employee.
In order to reveal the method of calculating the profitability of employees and the factors
affecting it based on practical data, we will compile the following table using the data of JSC
"Gijduvon cotton ginning" (Table 1).
The table shows that the amount of net profit and net sales of the enterprise has increased
significantly compared to the previous year. However, this growth does not have qualitatively
positive dynamics, because the sales margin decreased by 0.008 or 0.8 percent. It can also be
observed that the average number of employees of the enterprise has increased by 24 people,
and the investment in education has decreased by 20,758 thousand sum. Return on investment
in training and employee profitability, respectively 35,016, 78 thousand sum and 13,392,46
www.e-itt.uz
II SON. 2024
130
thousand sum increased, the increase of net income and profit amounts was positive, and the
decrease in the amount of investments in education had a negative effect.
We found it appropriate to use the logarithm method to calculate the factors affecting the
employee profitability indicator. This is due to the fact that the calculation result in the
logarithm method does not depend on the location of the factor in the model, and the level of
accuracy is much higher than other methods.
Table 1
Analysis of indicators related to employee profitability in business entity
№
Indicators
Abbr.
Last year
Reporting
year
Deviation
(-,+)
1.
Net profit for the reporting period, th.s.
NP
8608577
16900658
8292081
2.
Sale, thousand sum
S
135280942
299301580
164021138
3.
Investments in employee training, th.s.
IET
28278
7520
-20758
4.
Annual average number of employees, man
NE
568
592
24
5.
Sales profitability (1-line/2-line);
Р
с
0,064
0,056
-0,008
6.
Return on investments in education, th.s.
(2-line/3-line)
RIE
4783,96
39800,74
35016,78
7.
Investments in education per employee, th.s.
(3-line/4-line)
IEE
49,79
12,70
-37,09
8.
Return on employees, thousand sum (1-
line/4-line)
Р
х
15155,95
28548,41
13392,46
Source:
made by author.
Calculation of the effect of factors on the result using this method is carried out by the
following formulas cited in the literature on the theory of economic analysis.
1.
Р
х
Рс
= ∆Р
х
∗
ln(Р
с
1
:Р
с
0
)
ln(Р
х
1
:Р
х
0
)
=13392,46*
ln(0,056:0,064)
ln(28548,41:15155,95)
= - 2824,21
2.
Р
х
ТИқ
= ∆Р
х
∗
ln(ТИ
қ
1
:ТИ
қ
0
)
ln(Р
х
1
:Р
х
0
)
= 13392,46 ∗
ln(39800,74:4783,96)
ln(28548,41:15155,95)
= 45112,29
3.
Р
х
ТИб
= ∆Р
х
∗
ln(ТИ
б
1
:ТИ
б
0
)
ln(Р
х
1
:Р
х
0
)
= 13392,46 ∗
ln(12,70:49,79)
ln(28548,41:15155,95)
= −28895,62
The sum of the effects of each factor should be equal to the change in employee
productivity calculated as the result indicator.
Р
х
=
Р
х
Рс
+
Р
х
ТИқ
+
Р
х
ТИб
= (−2824,21) + 45112,29 + (−28895,62) = 13392,46
As a result of factor analysis, the following conclusions can be reached. During the
reporting period, the decrease in sales profitability by 0.008 or 0.8% reduced the profitability
of employees by 2824.41 thousand soums, and the decrease in investment in education per
employee by 37.09 thousand soums reduced the result to 28895.62 thousand soums. An
increase in the return on investment in employee training by 35,016.78 thousand soums caused
an increase in the profitability of employees by 45,112.29 thousand soums.
The above-mentioned factor analysis models are used in cases where the influence of
factors on the result is functional. However, there are also a number of stochastically related
factors that have a significant impact on the state of investments in human capital and their
effectiveness. These factors are commonly called external factors. Since it is not possible or
difficult to accurately calculate the impact of these factors’ value. In practice, several business
assessment tools, such as a SWOT analysis, competitor analysis, and other scenario planning
tools are used to evaluate external factors of business performance. As a result of the research,
it was concluded that it is appropriate to use PESTLE analysis in evaluating the external factors
affecting the efficiency of investments in human capital. A brief description of the classification
www.e-itt.uz
II SON. 2024
131
of external factors affecting the effectiveness of human capital investment using this method is
given below (Table 2).
Table 2
PESTLE analysis for human capital investments of entity
Political
factors
Economic
factors
Social
factors
Technological
factors
Legal
factors
Environmental
factors
lack of effective
state policy on
personnel
minimum wage
religious
factors, ethnic
views and
national values
technological
infrastructure
and its condition
labor law and
its
enforcement
environment in the
area where the
enterprise is
located
political crises
in public
administration
personal income
tax rate
composition,
quality and
development
of human
capital
level of
development of
innovative
developments
and intellectual
property objects
development
of internal
regulatory
documents for
personnel
management
problems related
to weather, water
and ecology in the
area where the
enterprise is
located
Source:
made by author.
Factors belonging to each group mentioned in the table have an impact on the life cycle of
investments. In the factor analysis of investments, we believe that it is necessary to draw
conclusions based on the study of indirect and external factors, in addition to direct and internal
factors affecting them.
Conclusion and suggestions.
In conclusion, there are theoretical, legal, and practical grounds for recognizing human
capital and investments in it as an important object of accounting and economic analysis.
Therefore, we believe that human capital should be one of the elements of financial reporting.
The effectiveness of investments in human capital is directly influenced by the return on
investment in education, the volume of investments in the education of one employee, and
return on employee indicators. It was concluded that it is advisable to use the logarithmic
method in calculating the influence of these factors.
The conducted research has shown the feasibility of using SWOT and PESTLE analysis to
assess factors indirectly influencing the effectiveness of investments in human capital in
business entities.
References:
Address (2018).The address of the President of the Republic of Uzbekistan to the Oliy
Majlis.—Тashkent: “Khalk suzi”.
Chaykovskaya L.A., Bistrova Y.O. (2011) Intellectual capital in financial statements.
International accounting. No.4 (154), pp.10-19.
Goshunova A.V. (2014). Accounting for investments in human capital in professional sport
organizations: dissertation for candidate of economic sciences, Kazan.
Jac Fitz-enz. (2006). The ROI of human capital: Measuring economic value of employee
performance, Moscow, Vershina, P.298
Kulikova A.A. (2007). Human resourse as an accounting category. Siberian Financial School,
No.1(65), pp. 64-67.
Lange, Glenn-Marie; Wodon, Quentin; Carey, Kevin. (2018). The Changing Wealth of Nations
2018:
Building
a
Sustainable
Future.
©
Washington,
DC:
World
Bank.
http://hdl.handle.net/10986/29001 License: CC BY 3.0 IGO.”
www.e-itt.uz
II SON. 2024
132
Law (2019). The Law of the Republic of Uzbekistan "On Investments and Investment
Activities". December 25, 2019. LRU-598.
Ochilov O.I. (2023) Development of accounting and analysis methodology of investments.-
Tashkent, “Lesson Press”, P.219.
Pulatov M.E. (2017). Development of accounting and auditing methodology of intellectual
capital. Dissertation abstract, Tashkent, P.66.
Regulation (2015). Regulation on the criteria for evaluating the effectiveness of joint-stock
companies and other business entities with state participation. July 28, 2015. No.207
