AITB No. 37 Accounting for AI-Powered Smart Home Devices and Platforms
Issue: How should entities account for costs and benefits associated with the deployment and operation of AI-powered smart home devices and platforms?
Background: Smart home devices, from thermostats to security systems, are leveraging AI to learn user preferences, automate processes, and enhance home efficiency and security.
Guidance:
- Capitalization of Smart Home Device Costs: Expenses related to the development, acquisition, or manufacturing of AI-powered smart home devices intended for long-term residential use should be capitalized as tangible assets.
- Expensing of User Interface and Data Analytics Tools: Costs associated with developing user-friendly interfaces or tools for analyzing user behavior data to optimize device operations should be expensed as incurred.
- Amortization of Capitalized Device Costs: The capitalized costs of intangible components, like software, should be amortized over the component's expected useful life, considering technological advancements and evolving user needs.
- Benefit Recognition: Financial benefits arising from increased device sales, subscription-based services, energy savings for users, and enhanced brand loyalty due to the AI-enhanced capabilities of the devices should be recognized in the income statement in the corresponding period.
Examples:
- Company K1 spends $3M on developing an AI-powered smart thermostat system projected to offer advantages over a 5-year span. They would capitalize the intangible components and amortize them over the 5-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.