The measurement and disclosure of human capital in the financial statements by the Zimbabwean listed mining companies

Abstract

This study develops a framework for the measurement and disclosure of human capital in the financial statements of mining companies in Zimbabwe. Human capital is a crucial driver of company competitiveness, financial performance, value creation and sustainability in the 21st century. However, the measurement of human capital as an intangible asset is challenging in the Zimbabwean mining sector because companies fail to align human capital with current measures of asset value. The human capital disclosure practice is based on contextual settings and is influenced by unknown factors. Contextual settings lead to various ways of disclosing human capital in financial statements. This proliferates incomparable disclosure practices that give users of financial statements conflicting information. This study adopted a mixed-method research approach that followed a pragmatic philosophy and a sequential exploratory research design in examining the measurement and disclosure of human capital by Zimbabwean mining companies. Data was collected in two phases. Qualitative data was collected first, while quantitative data was collected last. The target population of the study comprised managers, professionals and technicians in the mining sector. A thematic analysis was used to investigate and interpret qualitative data. Seven main themes emerged from the findings. Factor analysis was used to analyse and interpret quantitative data. The findings revealed that there is no accepted framework for reporting aspects of human capital. Companies measure human capital based on a contextual setting. The findings further revealed that the relationship between the value of human capital and the value of a company is unknown. The research findings also showed that aspects of human capital are not fully accounted for under the current financial reporting system. The findings reflected that companies measure the value of human capital using the wages and salary aspect. The study recommends the development of a context-based framework that would act as a guideline for measuring and disclosing human capital in the financial statements of Zimbabwean mining companies. The measurement and disclosure of human capital might enhance the value and relevance of financial statements. The study also recommends that mining companies should define all major classes of human capital in their financial statements. These include equity issues, health, wellness and safety, training and development, and employee competencies. The classification of aspects of human capital will allow companies to measure the contribution of each aspect towards financial performance and value creation. The study further recommends the development of a stakeholder involvement strategy and the implementation of effective

corporate governance systems, considering aspects such as legal systems, financial development and good governance.