Financial
Counseling and Planning
The Journal of the
Association for Financial
Counseling and
Planning Education
VolumeĀ 15(1),
2004
Human Capital and the
Balance Sheet
Kenneth M. Washer and Srinivas Nippani
- Practitioners and
personal finance textbooks generally exclude human capital when
constructing balance sheets although this asset represents an
individual’s earning power and is liquidated over time to meet
financial needs. Representing human capital on the balance sheet
recognizes its importance as a factor in financial decisions. For many
investors, including the value of human capital justifies an increase
in the level of risk in the portfolio. The returns from human capital
are often hedged with life and disability insurance which can also be
incorporated into the financial statement.
Keywords: Personal financial
statement, Human capital