AITB No. 18 Accounting for AI-Enhanced Human Resource Management Systems
Issue: How should entities account for costs and benefits associated with the implementation of AI-enhanced human resource (HR) management systems?
Background: Modern HR operations are leveraging AI to optimize recruitment, enhance employee engagement, predict turnover, and provide personalized training. These AI-driven systems can transform HR operations and lead to significant cost savings.
Guidance:
- Capitalization of HR System Costs: Costs related to the development or acquisition of AI-enhanced HR management systems for long-term operational use should be capitalized as an intangible asset.
- Expensing of Data Acquisition and Minor Updates: Costs related to acquiring employee data or minor system enhancements should be expensed as they are incurred.
- Amortization of Capitalized HR System Costs: The capitalized costs should be amortized over the system's expected useful life, considering technological advancements and evolving HR practices.
- Benefit Recognition: Financial benefits resulting from optimized recruitment costs, reduced employee turnover, improved training outcomes, and increased employee productivity due to the AI system should be recognized in the income statement in the respective period.
Examples:
- Company R invests $1.9M in an AI-enhanced HR management system projected to be beneficial for 6 years. They would capitalize the $1.9M and amortize it over the 6-year span.
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.