Amortisation policy memo
An amortisation-policy memo records how a capitalised AI model will unwind through the P&L and why. It states the asset and recognition date, the useful life and its justification, the method and start date, and the review trigger. The skeleton below is structured so the useful-life judgement is the evidenced centrepiece.
The memo structure
- Identify the asset and recognition date. State the capitalised model, its carrying amount, and the date the recognition criteria were first met.
- State the useful life and its basis. Give the useful life and the evidence for it, such as the entity's model-replacement history and release cadence.
- State the amortisation method and start date. State the method (usually straight-line) and that amortisation begins when the asset is available for use.
- State the review trigger. Commit to reviewing the useful life and method at least at each year end and on any impairment indicator.
Making the useful life defensible
The useful life is the judgement most likely to be challenged. Support it with the entity's own evidence: how often it has replaced models, the pace of base-model improvement it relies on, and any contractual or data constraint that limits the asset's life. A life asserted without this support is the weak point of most memos.
Asset: fine-tuned internal support model. Recognition date: the date the six criteria were met. Useful life: 18 months, based on the entity replacing comparable models roughly every 18 months over the prior three years. Method: straight-line from go-live. Review: at each year end. All figures are illustrative.
- S1IAS 38 Intangible Assets, IFRS Foundation (IFRS). https://www.ifrs.org/issued-standards/list-of-standards/ias-38-intangible-assets/
- S3Applying ASC 985-20 and ASC 350-40 to software costs, Crowe (US GAAP). https://www.crowe.com/insights/how-to-apply-asc-985-20-asc-350-40-software-costs