Though HRM is considered to be a critical factor for the success of a business and human capital being a major contributor to this success, valuation of human resources and its accounting is yet to find its proper place in the financial statements prepared under the present system of financial accounting. But with the emergence of knowledge economy, the valuation of business without considering human resources is being questioned in various forums on different occasions. It is being argued that the human resources are to be included in the total value of a business, as people constitute the core element of an organization and their efficiency, knowledge, quality and character can make or break a business. The various facets of these emerging challenges have been highlighted in this article.

The paradigm shift in the economic environment witnessed since the last decade has led to more attention being paid towards knowledge and its expanding dimensions as a resource in trade and commerce of the 21st Century. Knowledge is being used as a new currency in business as a cutting edge to meet competition favorably and to accomplish goals more easily and conveniently. As the business is becoming more global, knowledge is being added as a prefix to every economic aspect—knowledge workers, knowledge organization, knowledge management and, above all, knowledge economy. Knowledge can be manipulated to convert difficulties into opportunities, uncertainties into certainties and risks into rewards. No other resource in business, except human resource, possesses this knowledge. That is why there is so much demand for Human Resource Management (HRM) and its twin limbs—Human Resource Valuation(HRV) and Human Resource Accounting (HRA).

There has been a growing recognition that in this era of rapid transformation, spectacular technological advancement, globalization of economy, and increasing specialization and complexities in knowledge dissemination, valuation of human resources and its accounting have become major challenges to the accounting profession both nationally and internationally.

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