AITB No. 35 Accounting for AI-Enhanced Virtual Reality (VR) and Augmented Reality (AR) Platforms
Issue: How should entities account for costs and benefits associated with the development and deployment of AI-enhanced VR and AR platforms?
Background: VR and AR platforms, empowered by AI, offer immersive experiences for entertainment, training, and remote collaboration. AI-driven personalization and interactivity are enhancing user engagement and platform effectiveness.
Guidance:
- Capitalization of VR/AR Platform Costs: Expenses related to the development or acquisition of AI-enhanced VR and AR platforms intended for long-term user interaction should be capitalized as an intangible asset.
- Expensing of Content Development and User Interface Tools: Costs associated with developing immersive content or tools for enhancing user interactivity should be expensed as incurred.
- Amortization of Capitalized Platform Costs: The capitalized costs should be amortized over the platform's expected useful life, considering technological advancements and evolving user preferences.
- Benefit Recognition: Financial benefits derived from increased platform usage, premium content sales, improved training outcomes, and enhanced remote collaboration due to the AI-driven VR/AR capabilities should be recognized in the income statement in the relevant period.
Examples:
- Entertainment company I1 invests $5M in an AI-enhanced VR gaming platform projected to provide benefits over an 8-year duration. They would capitalize the $5M and amortize it over the 8-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.