Human Capital: Discussed and Measured or Undiscussed and Unmeasured (Activision Blizzard)
The U.S. Securities and Exchange Commission (SEC) amended its rules regarding human capital disclosures in 2020. This case summarizes those amendments and reviews how Activision Blizzard (ATVI) disclosed information to shareholders regarding its human capital management from 2020-2021 including issues related to sexual harassment reporting as well as investigations and lawsuits initiated by federal and state agencies.
Content notice: Mentions of sexual harassment, discrimination, and toxic workplace culture. This case provides the context for a discussion on intangible assets, focusing on human capital disclosures and their relevance in accounting. In a 10-K filed in 2021, Activision Blizzard omitted information related to a state-level lawsuit, filed in July 2021 after a two-year investigation, that accused the company of sexual harassment, employee discrimination, and retaliatory practices. In January 2022, Microsoft announced the acquisition of Activision Blizzard, a deal expected to close by summer 2023 pending regulatory and shareholder approval. The discussion here focuses on the reasons to measure human capital, how to measure this resource, who the decision makers should be on materiality, and companies’ incentives to disclose these measures.