AITB No. 28 Accounting for AI-Powered Cybersecurity Solutions
Issue: How should entities account for costs and benefits associated with the deployment of AI-powered cybersecurity solutions?
Background: With increasing cyber threats and sophisticated attacks, organizations are leveraging AI to predict, detect, and counteract cybersecurity breaches. AI-driven systems analyze patterns, recognize anomalies, and take preventive actions in real-time.
Guidance:
- Capitalization of Cybersecurity Solution Costs: Expenses related to the development or acquisition of AI-powered cybersecurity solutions intended for long-term organizational protection should be capitalized as an intangible asset.
- Expensing of Threat Intelligence and Regular Updates: Costs associated with acquiring threat intelligence or regular system updates to stay ahead of evolving cyber threats should be expensed as incurred.
- Amortization of Capitalized Solution Costs: The capitalized costs should be amortized over the solution's expected useful life, considering technological advancements and the evolving nature of cyber threats.
- Benefit Recognition: Financial benefits stemming from avoided losses due to breaches, reduced investigation costs, and enhanced stakeholder trust due to effective cybersecurity measures should be recognized in the income statement in the respective period.
Examples:
- Company B1 invests $6M in an AI-powered cybersecurity solution with an expected effective lifespan of 10 years. They would capitalize the $6M and amortize it over the 10-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.