It is true that company monetary statements will often consist of narrative information about staff as a key resource. However, under accounting regulation this resource is not shown as an asset in the statement of financial position for a number of reasons which are examined below.

Narrative Reporting:

Entities that depend on human resources to produces revenue often will have a comparatively low level of capital investment. This often creates the statement of financial position look undercapitalised and it is complicated to see where the value of the entity lies. Frequent ratios targeting effectiveness and financial position, like return on capital employed and revenue on assets will not provide us with helpful measures as the key assets of the business are not reflected in the financial statements.

For successful companies the space between market capitalisation and book value of net assets can be substantial and it is therefore significant for entities to inform the market of key personnel resource, processes or intellectual capital.

Recognition Issues:

The acknowledgment of assets requires convinced criteria to be met; an asset must be "a resource embarrassed by an entity as a result of a past event and from which prospect economic benefit is expected to flow". This asset must then be competent of being reliably measured in order to be accepted in the statement of financial position.

Human resources are expected to create future economic assistance for the entity; however the resource is one that cannot be forced. Staff members are free to depart at any time taking their skills and intellectual capital with them.

Despite the issue of control, there are also a number of issues regarding the measurement of a staff resource as an asset. The cost of staff is their training costs and payment. It could be disagree that training costs have an on-going advantage and therefore could be capitalised, however, remuneration relates to a service provided by the staff in that year and therefore should be occupied to the income statement as a period cost. It is possible to value assets on a fair value basis; however, for staff this would engage establishing future cash flows and discounting to present value. It is difficult to see how this could be accomplished on a reliable basis due to the estimation required.

Staff resource therefore fails the acknowledgment criteria for an asset and cannot be incorporated in the statement of financial position.

There has been a marked enhance in the volume of narrative reporting as entities look to find a appropriate manner in which to inform investors about within generated intangibles such as trained staff, processes and key customers. These are not known in the financial statements but are fundamental to the future success of the entity and are probable to generate future revenue. This information is therefore needed to help users make knowledgeable investment decisions.