Impact of Human Resource Accounting on the Quality of Financial Reports of Non-Financial Companies in Nigeria: Possibilities and Challenges

Despite the advances in human resource accounting (HRA), companies in Nigeria are far behind in adopting this new concept in accounting. Generally, adopting HRA by companies in Nigeria remains voluntary due to diverse factors. This research investigated the effects of voluntary HRA disclosure on the FRQ of non-financial companies in Nigeria using data from the 2019 financial reports of 86 firms and 46 professional accountants. The research also studied the challenges of HRA in Nigeria. The study applied the Syed HRA disclosure index to measure HRA disclosure. The study assessed the level of FRQ by operationalising the qualitative characteristics of FR. The study used regression analysis to investigate the impact of HRAD on FRQ. The Kruskal-Wallis test was applied to ascertain the differences among the three groups of accountants. The results of the regression analysis show that HRAD contributes toward improving FRQ. Additionally, the primary data shows that accountants agree that HRAD improves FRQ. The results also reveal that the main reasons for not recognising the value of the investment in HR are the absence of acceptable valuation methods, fear of competitors, and sensitivity of HRV. The findings also demonstrate that the significant issue with HRA in Nigeria is not a lack of a generally accepted valuation model. The results suggest that the lack of a robust framework for auditing HRA information is the main problem of HRA in Nigeria. Among other things, this research recommends that listed non-financial firms in Nigeria should adopt HRA. The study also calls for the development and issuance of accounting and auditing standards. The research also calls for future research to study the association between HRAD and FRQ using longitudinal study.