Empirical studies have established that companies in Nigeria are far behind in adopting human resource (HR) accounting despite the advances in the field. Generally, in Nigeria, HR accounting remains voluntary due to diverse factors. Some studies recommended improved adoption, disclosure, and standardisation of the concept despite the dearth of empirical evidence to support the impact of HR accounting on the financial reporting quality (FRQ) of non-financial companies.
This study used cross-section survey design to examine the impact of HR accounting on the FRQ of non-financial companies in Nigeria, as well as the challenges associated with its implementation. The research questions sought to determine the relationship between HR accounting and FRQ, its contribution to FRQ, and the reasons for not reporting HR value in balance sheet. The research involved collecting data from a sample of 46 professional accountants via an online questionnaire, and 2019 financial reports of 86 non-financial companies. Regression analysis and Kruskal Wallis were used for statistical analysis.
The results showed that there is a positive relationship between HR accounting and financial reporting quality and that HR accounting improves FRQ of non-financial companies. From the results, the main reason for not reporting HR value in the balance sheet was found to be the absence of acceptable valuation methods. The major challenge of HR accounting in Nigeria was identified as the absence of an audit framework. The study recommends that non-financial firms in Nigeria should adopt HR accounting to improve their FRQ, and that accounting and auditing standards on HR accounting should be developed and issued.