"Should Human Capital be Recognized as an Asset?"

We often hear managers refer to employees as their company's greatest "asset". However, they are rarely recorded as such in the balance sheet, and in times of financial difficulty employee expenses are often amongst the first to be minimised. For example, in the wake of five consecutive years of poor financial performance, blamed primarily on poor student retention, Victoria University recently announced that 115 academic positions would be cut. Whilst it is generally accepted that human capital is not treated as an asset, this accounting treatment is not consistent across all industries. For example, Manchester United lists in their 2015 annual report under Note 16 "Players' registrations and other intangible assets" as having a net book value of £204,572,000.

Evidence suggests that certain individuals, and/or the companies they represent, do consider their personal (and often highly specialised) skills and attributes to be assets. For example, football (soccer) players David Beckham and Cristiano Ronaldo have reportedly insured their legs for $70m and $144m respectively, whilst dancer Michael Flatley insured his for $60m. Pianist Lang Lang has reportedly insured his hands for upwards of $15m, and "The Boss" Bruce Springsteen insured his voice for $6m. Teeth-whitening company AquaFresh insured the smile of their star celebrity endorser, America Ferrara, for $10m, and evidence suggests that the appointment of a new CEO who "talks the talk" can drive share prices up by on average 12.6% (or $6.6b on the US market).

Whilst human capital is not commonly recognised as an asset, clearly there are some economic benefits to be obtained from the skills and attributes of certain individuals. Is there any difference between a celebrity endorser with a perfect smile, and a service provider who smiles and greets every customer/client by name? A footballer who has trained their whole life to kick goals on the field, to a scientist who has trained their whole life to kick goals in their field?

You have been approached by a journalist by the name of Tony Trainer, from the local newspaper. This journalist would like to publish a piece on whether human capital should be accounted for as an asset, and would like your expert opinion, as an accountant, on your interpretation of the Accounting Standards and Conceptual Framework regarding this issue.

To get you started I have provided a couple of resources that may be helpful - these are by no means exhaustive, and are certainly not the best in their field. You are encouraged to use these as a starting point to find your own references.

Required: Write a letter to Tony addressing the question: "Should Human Capital be Recognised as an Asset?". In your response you should address both sides of the argument (with appropriate references), before coming to your own conclusion. This letter should in proper letter format, and given that its contents may be published in the local newspaper, should be written in a professional manner. It will be published in the business section of the newspaper so you may use accounting terminology.