Amortization and useful life for a model that ages fast
A capitalized AI asset needs a finite useful life and an amortization method. For a model likely obsolete within 18 to 24 months, that short life must be reflected honestly rather than stretched to flatter earnings. Straight-line is the default; a consumption pattern is used only if reliably determinable IAS 38-97. The commitment term caps the useful life.
Setting a life for a fast-obsolescing model
The instinct to amortize over three to five years is wrong for most AI assets. If the model or the workflow it serves will be superseded within two years, the useful life is two years or less. A shorter life increases amortization and lowers reported profit in the near term, but it is the defensible estimate.
Instruments and mechanics that land here
Primary sources
- [S5] IFRS Foundation: IAS 38 Intangible Assets (IFRS)
- [S1] KPMG: Hot Topic: Accounting for internal-use software (ASC 350-40) (US GAAP)
Ledger current as of 2026-07-24. A position and a citation, not accounting advice. See how we cite.