AITB No. 42 Accounting for AI-Powered Predictive Maintenance Systems
Issue: How should entities account for costs and benefits associated with the deployment and operation of AI-powered predictive maintenance systems for machinery and equipment?
Background: Predictive maintenance systems, powered by AI, anticipate equipment failures, schedule timely maintenance, and enhance the longevity and efficiency of machinery, leading to reduced operational downtimes and costs.
Guidance:
- Capitalization of Predictive Maintenance System Costs: Expenses related to the development or acquisition of AI-powered predictive maintenance systems intended for long-term machinery upkeep should be capitalized as an intangible asset.
- Expensing of Data Collection and Analysis Tools: Costs associated with tools for collecting machinery performance data or for analyzing this data to predict maintenance needs 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, industry standards, and machinery lifespan.
- Benefit Recognition: Financial benefits arising from reduced machinery downtimes, extended equipment lifespan, minimized maintenance costs, and enhanced operational efficiency due to the AI system's predictions should be recognized in the income statement in the relevant period.
Examples:
- Factory P1 spends $1.5M on an AI-powered predictive maintenance system expected to be effective for 6 years. They would capitalize the $1.5M 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.