AITB No. 50 Accounting for AI-Powered Health Monitoring Wearables
Issue: How should entities account for costs and benefits associated with the development, deployment, and operation of AI-powered health monitoring wearables?
Background: The healthcare and tech industries are witnessing a surge in the adoption of wearables that use AI to monitor vital signs, predict health anomalies, and offer real-time health insights, leading to proactive health management and reduced medical costs.
Guidance:
- Capitalization of Wearable Development Costs: Expenses related to the design, development, or acquisition of AI-powered health monitoring wearables intended for long-term health monitoring should be capitalized as an intangible asset.
- Expensing of Data Collection and AI Training Tools: Costs associated with collecting health data, training AI models, and refining predictive health algorithms based on user feedback should be expensed as incurred.
- Amortization of Capitalized Wearable Costs: The capitalized costs should be amortized over the wearable's expected useful life, considering technological advancements, evolving healthcare needs, and device durability.
- Benefit Recognition: Financial benefits derived from reduced healthcare costs, enhanced user health management, improved health outcomes, and proactive medical interventions due to the AI wearable's insights should be recognized in the income statement in the corresponding period.
Examples:
- Healthtech company X1 invests $7M in developing an AI-powered wearable to monitor cardiac health, expected to be effective for 8 years. They would capitalize the $7M and amortize it over the 8-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.