As a senior accounting student, I was very interested in the idea of treating people as an asset rather than an expense that was introduced in HIPInvestor and Sustainable Brands’ presentation – Surprising Business Value from New Metrics of Sustainability. The presentation had some valid points. Firms constantly communicate to external parties about their people being their most valuable assets. Additionally tech firms and service firms, which form a growing majority of companies worldwide, have very few tangible assets. To say that the economic value of one of these firms is tied to the number of desks and computers the firm owns would be plain ignorant.

Human Capital may be the real driver behind profitability.

Supporters of this movement also claim recording Human Capital as an asset to have social sustainability benefits. One common metric of social sustainability is employee happiness and the presence of a positive work environment. Although studies show that companies who invest in their employees to create a positive work environment perform better financially than their competitors, shareholders require more information than study results to justify the expenses. Therefore by capitalizing (recording as an asset) the value of employees, companies are provided an incentive to invest in their employees. Paying for a new office wellness program would be akin to paying for upgrades of machinery within the financial statements, the latter being widely accepted by shareholders as a ‘proper’ use of cash flows.

Studies say that a happy office is a productive office.

Lastly, there is even an argument from a technical or GAAP standpoint that humans should be treated as an asset! However, I will spare you the boredom in this blog post. If you are really inclined to read about it – AccountingToday has got you covered.

While these social and technical arguments are compelling, in my opinion our current accounting system would not function well if every company began recording their intangible assets on their balance sheets. The ability to exploit this idea by greedy evildoers is too great. We finally recovered from the housing mortgage recession of 2008, let’s not enable another potential financial crisis.