AITB No. 07 Accounting for AI-Driven Supply Chain Optimization
Issue: How should entities account for costs and benefits associated with the implementation of AI-driven supply chain optimization tools?
Background: AI-driven supply chain optimization tools offer real-time analytics, predictive forecasting, and automated decision-making to enhance efficiency, reduce costs, and improve delivery times. Such tools often involve initial setup costs and ongoing maintenance expenses.
Guidance:
- Capitalization of Supply Chain Tool Costs: Costs associated with the development or acquisition of AI supply chain tools intended for long-term use should be capitalized as an intangible asset.
- Expensing of Continuous Improvements: Costs related to iterative improvements, data updates, or minor system enhancements should be expensed as incurred.
- Amortization of Capitalized Supply Chain Costs: The capitalized costs should be amortized over the tool's expected useful life, taking into account technological advancements and industry-specific changes.
- Benefit Recognition: Benefits realized from improved inventory management, reduced wastage, efficient resource allocation, and faster delivery times due to the AI optimization should be reflected in the income statement as they occur.
Examples:
- Company G invests $2.5M in an AI-driven supply chain optimization tool expected to be relevant for 4 years. They would capitalize the $2.5M and amortize it over the 4-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.