AITB No. 52 Accounting for AI-Enhanced Supply Chain Management Systems
Issue: How should entities account for costs and benefits associated with the deployment and operation of AI-enhanced supply chain management systems?
Background: In the era of globalization, entities are leveraging AI to optimize their supply chains, reduce lead times, predict disruptions, and enhance inventory management, leading to reduced costs and improved operational efficiency.
Guidance:
- Capitalization of Supply Chain System Costs: Expenses related to the development or acquisition of AI-enhanced supply chain management systems intended for long-term business operations should be capitalized as an intangible asset.
- Expensing of Data Collection and Analysis Tools: Costs associated with tools for collecting supply chain data, analyzing supplier performance, and refining procurement strategies based on AI insights 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, market dynamics, and evolving supply chain strategies.
- Benefit Recognition: Financial benefits derived from reduced procurement costs, enhanced supplier negotiations, improved inventory turnover, and optimized logistics due to the AI system's capabilities should be recognized in the income statement in the respective period.
Examples:
- Manufacturing company Z1 invests $6M in an AI-enhanced supply chain management system expected to yield benefits over a 10-year timeframe. They would capitalize the $6M and amortize it over the 10-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.