AITB No. 29 Accounting for AI-Enhanced Human Resource Management Systems
Issue: How should entities account for costs and benefits associated with the use of AI-enhanced human resource (HR) management systems?
Background: Modern HR functions are utilizing AI to streamline recruitment, performance evaluations, and employee engagement. AI-driven platforms can optimize talent acquisition, predict employee attrition, and personalize training programs.
Guidance:
- Capitalization of HR Management System Costs: Expenses related to the development or acquisition of AI-enhanced HR management systems intended for long-term human capital optimization should be capitalized as an intangible asset.
- Expensing of Talent Acquisition and Training Content: Costs associated with specific talent acquisition campaigns or the development of AI-driven training content should be expensed as incurred.
- Amortization of Capitalized 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 reduced recruitment costs, improved employee retention, enhanced organizational culture, and optimized training outcomes due to the AI system's insights should be recognized in the income statement in the relevant period.
Examples:
- Company C1 spends $4.2M on an AI-enhanced HR management system projected to be beneficial for 8 years. They would capitalize the $4.2M and amortize it over the 8-year duration.
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.