Assignment on

“Which IFRS Standards Have Changed Over Time Based on Historical Cost
and Fair Value? A Linkage with Human Resource Accounting (HRA)
Perspective”
Course Title: Human Resource Accounting

Submitted to:
Adiba Rahman Bushra Chowdhury

Lecturer

Department of Business Administration

Shahjalal University of Science &Technology, Sylhet

Submitted by:
Parvej Ahmed Khan
Reg: 2019731044
MBA 1 st semester
Session: 2023-24
Department of Business Administration
Contents
1. Introduction ................................................................................................... 3
1.1 Discussion ................................................................................................ 3
2. Evolution of IFRS Standards: From Historical Cost to Fair Value..................... 4
2.1 Historical Background............................................................................... 4
2.2 IFRS Standards and Measurement Models ................................................. 4
3. Detailed Explanation of Key Standards ........................................................... 5
3.1 IAS 16 Property, Plant and Equipment ....................................................... 5
3.2 IAS 40 Investment Property....................................................................... 5
3.3 IFRS 9 to IAS 39 - Financial Instruments ................................................... 5
3.4 IFRS 13 Fair Value Measurement .............................................................. 5
3.5 IFRS 7 Financial Instrument Disclosures.................................................... 5
4. Linking to Human Resource Accounting (HRA).............................................. 6
4.1 Definition & Objective of HRA ................................................................. 6
4.2 HRA Historical Cost Approach .................................................................. 6
4.3 HRA Fair Value Approach ......................................................................... 6
5. Critical Analysis............................................................................................. 7
6. Conclusion..................................................................................................... 7
7. References ..................................................................................................... 8
 1. Introduction
1.1 Discussion
The provided topic addresses two important issues of accounting: the development
of International Financial Reporting Standards (IFRS) in terms of Historical Cost
and Fair Value, and their connection with Human Resource Accounting (HRA).
Historical Cost is the recording of the assets and liabilities at the price they were
initially purchased. It is reliable and verifiable since the value is founded on real
transactions (IFRS Foundation, 2024).
Fair Value, however, is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction in the market at the measurement date. It
is more up to date and relevant to the state of the economy but it brings volatility
and subjectivity (IFRS Foundation, 2024).
In the long run, IFRS has shifted its focus on the use of historical cost to fair value
measurement to give more relevant information to the investors and other
stakeholders. This change has impacted on standards like IAS 16, IAS 40, IFRS 7,
IFRS 9 and IFRS 13 (IASB, 2014).
The HRA viewpoint enters the picture because it has a similar conceptual argument:
should human resources be recorded at the cost of acquisition (training, hiring,
development) or should their current economic value be estimated, similar to fair
value principles. This connection assists in the realization of how the changing
notions of valuation affect tangible and intangible assets in accounting (Flamholtz,
1974
2. Evolution of IFRS Standards: From Historical Cost to Fair Value
2.1 Historical Background
First, IFRS standards were mostly founded on historical cost because it was
objective and simple. Nevertheless, the fair value approach came into existence as
the global financial markets became complex and the stakeholders required more
relevant and timely information. In the current environment, the majority of IFRS
standards offer a fair value or cost model option or require fair value of some asset
classes (IFRS Foundation, 2024).

2.2 IFRS Standards and Measurement Models

Table 1: IFRS Standards – Historical Cost vs Fair Value
Standard Initial Approach Current Approach Key
Change
Year
IAS 16 – Property, Historical Cost Option for Revised
Plant & Equipment Revaluation (Fair 2003
Value)
IAS 40 – Investment Historical Cost Fair Value or Cost 2000
Property Model
IAS 39 – Financial Historical Cost Mixed Model 1998
Instruments (Amortized Cost)
IFRS 9 – Financial Replaced IAS 39 Fair Value Focused 2014
Instruments
IFRS 13 – Fair Value N/A Standardized Fair 2011
Measurement Value Framework
 IFRS 7 – Disclosures N/A Transparency on 2005
Measurement Basis
(Source: IASB, 2014; IASB, 2003; IASB, 2000)

3. Detailed Explanation of Key Standards

3.1 IAS 16 Property, Plant and Equipment
IAS 16 originally required that assets be carried at historical cost minus depreciation.
The revaluation model was permitted through amendments, and this facilitated the
measurement of fair value, which made it more relevant to stakeholders (IASB,
2003).

3.2 IAS 40 Investment Property

Proposed the fair value model as a replacement to historical cost. Under the model,
the change in the value of property is reflected in profit or loss at every period (IASB,
2000).

3.3 IFRS 9 to IAS 39 - Financial Instruments

IAS 39 was based on historical cost and amortized cost of the majority of
instruments. It has been replaced by IFRS 9 that has introduced the fair value as the
primary measurement basis, which is the real economic value of financial
instruments (IASB, 2014).

3.4 IFRS 13 Fair Value Measurement

Offers one, uniform framework of fair value measurements to all standards and
presents a three-level hierarchy of valuation inputs (IFRS Foundation, 2024).

3.5 IFRS 7 Financial Instrument Disclosures

Requires a lot of disclosure of measurement of instruments at cost or fair value and
risks (IASB, 2014).
 4. Linking to Human Resource Accounting (HRA)
4.1 Definition & Objective of HRA
Human Resource Accounting (HRA) is the identification, measurement and
reporting of the value of human resources in an organization. Employees are also a
source of future economic benefits just as physical assets and they ought to be treated
as assets (Flamholtz, 1974).

4.2 HRA Historical Cost Approach

• Keeps a record of the actual costs incurred in recruitment, selection, training
and development.
• Strengths: Reasonable, testable.
• Cons: It does not take into consideration the growing importance of skilled
and experienced employees (Flamholtz, 1974).

4.3 HRA Fair Value Approach

• Efforts to measure the present economic value of employees, e.g., market
value or present value of future earnings.
• Positives: Topical, suggests actual value.
• Weaknesses: Extremely subjective and complicated (Flamholtz, 1974).
Table 2: Historical Cost vs Fair Value in HRA
Basis Application in HRA Pros Cons
Historical Cost of hiring & Objective, Ignores value growth
Cost training auditable
Fair Value Market-based Relevant, Subjective, hard to
valuation informative measure
(Source: Flamholtz, 1974)
5. Critical Analysis
The move of IFRS to fair value is a reflection of the same argument in HRA.
Although fair value is more relevant, it is also more volatile and harder to measure -
just as it is to value human resources (IFRS Foundation, 2024). Both frameworks
are geared towards improved decision-making, yet are limited in practice.

6. Conclusion
The development of IFRS standards to fair value shows the international demand of
relevant and transparent financial reporting. This shift has a direct impact on HRA,
where fair value-based methods can give a better idea of employee value. But,
similarly to IFRS, HRA has to get rid of subjectivity and valuation problems to
become a widely accepted method (Flamholtz, 1974).
7. References
• Flamholtz, E. (1974). Human Resource Accounting: Theory and Practice. Los
Angeles: Dickenson Publishing.
• International Accounting Standards Board (IASB). (2000). IAS 40 Investment
Property.
• IASB. (2003). IAS 16 Property, Plant and Equipment.
• IASB. (2014). IFRS 9 Financial Instruments.
• IFRS Foundation. (2024). Conceptual Framework and Measurement Basis.
• IASB. (2011). IFRS 13 Fair Value Measurement.
• IASB. (2005). IFRS 7 Financial Instruments: Disclosures.