AITB No. 05 Accounting for AI-Driven Personalized Marketing Campaigns
Issue: How should entities account for the costs associated with AI-driven personalized marketing campaigns, and how should the benefits or returns from such campaigns be recognized?
Background: AI-driven personalized marketing campaigns target specific audience segments based on their preferences and behaviors. The costs associated with these campaigns can be significant, but they often result in higher engagement and conversion rates.
Guidance:
- Capitalization of Campaign Development Costs: If the AI-driven marketing campaign is expected to provide benefits over multiple periods, the associated development costs should be capitalized. Otherwise, they should be expensed as incurred.
- Recognition of Campaign Revenues: Revenues generated directly from these campaigns should be recognized in the period the sales occur. If there's a subscription model in place, the revenue should be recognized over the subscription period.
- Amortization of Capitalized Campaign Costs: If costs are capitalized, they should be amortized over the expected benefit period of the campaign, considering the typical customer engagement lifecycle.
- Treatment of Campaign Maintenance and Updates: Costs associated with maintaining or updating the AI model for the campaign, unless they provide benefits over multiple periods, should be expensed as incurred.
Examples:
- Company E spends $4M developing an AI-driven marketing campaign expected to last for 3 years. They would capitalize the $4M and amortize it over the 3-year period.
Note: This is a fictional representation and does not represent any real-world standard for AI. The development of such standards would involve extensive consultations with experts, stakeholders, and the public. Fictional representations simplify complex AI concepts, stimulate discussion, envision future scenarios, highlight ethical considerations, encourage creativity, bridge knowledge gaps, and set benchmarks for debate in fields like accounting.