AITB No. 16 Accounting for AI-Driven Personalized Marketing Campaigns
Issue: How should entities account for costs and benefits associated with the design and deployment of AI-driven personalized marketing campaigns?
Background: Personalized marketing campaigns powered by AI analyze customer data to deliver tailored advertisements and promotions to specific individuals or segments. Such campaigns can significantly enhance customer engagement and conversion rates.
Guidance:
- Expensing of Campaign Design and Deployment Costs: Costs associated with the design, development, and deployment of AI-driven personalized marketing campaigns should be expensed as incurred, given the short-lived nature of such campaigns.
- Capitalization of AI Marketing Tool Costs: If an entity develops or acquires an AI tool or software for repeated use in multiple campaigns, the costs should be capitalized as an intangible asset.
- Amortization of Capitalized AI Marketing Tool Costs: The capitalized costs of the AI tool or software should be amortized over its expected useful life, considering technological advancements and changing marketing strategies.
- Benefit Recognition: Financial benefits resulting from increased sales, enhanced customer loyalty, and improved brand recognition due to the AI-driven campaigns should be recognized in the income statement in the relevant period.
Examples:
- Company P spends $800K on an AI tool for designing personalized marketing campaigns with an expected lifespan of 5 years. They would capitalize the $800K and amortize it over 5 years, while the costs of individual campaigns using the tool would be expensed as incurred.
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.