SAIFAC No. 5 Recognition and Measurement in Financial Statements of AI-Intensive Enterprises

Purpose and Scope:

This statement offers guidelines on what should be recognized and how it should be measured in financial statements of entities deeply involved in AI or those whose operations are majorly impacted by AI.

1. Recognition of AI Assets:

• AI assets should be recognized when it's probable that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably.

2. Measurement of AI Assets:

• Initial recognition of AI assets should be at cost. Subsequent to initial recognition, entities have a choice to carry AI assets at a revalued amount, less subsequent amortization and impairment losses.

3. Recognition of AI Liabilities:

• AI liabilities should be recognized when the entity has a present obligation (legal or constructive) as a result of a past event, it's probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.

4. Measurement of AI Liabilities:

• AI liabilities should be measured at the best estimate of the expenditure required to settle the present obligation, considering risks and uncertainties surrounding the obligation.

5. AI Revenue Recognition:

• Revenue from AI products or services should be recognized when significant risks and rewards of ownership have been transferred to the buyer, no continuing managerial involvement with the goods is retained, and the amount of revenue can be reliably measured.

6. Impairment of AI Assets:

• At each balance sheet date, an entity should review the carrying amounts of its AI assets to determine if those assets have been impaired.

7. AI Research and Development Costs:

• Expenditure on research (or on the research phase of an internal project) should be recognized as an expense when incurred. Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the entity intends and has sufficient resources to complete development and to use or sell the asset.

Updates and Amendments:The SAIFAC guidelines will be periodically reviewed and updated to accommodate the rapidly evolving nature of AI technology, changing financial practices in AI-intensive entities, and feedback from stakeholders and the public.

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.