CapitalizeAmortization

Amortization and useful life for a model that ages fast

The posting

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.

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 If the model or the workflow it serves will be superseded within two years, the useful life is two years or less.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.

Amortization over an 18 to 24 month life

Instruments and mechanics that land here

Term length and amortization
Impairment and obsolescence
Treatment: capitalize
Standard: IAS 38

Primary sources

[S5] IFRS Foundation: IAS 38 Intangible Assets (IFRS)
[S7] FASB: ASU 2025-06, Intangibles, Goodwill and Other, Internal-Use Software (Subtopic 350-40): Targeted Improvements (issued September 2025; reproduces the amended ASC 350-40 text) (US GAAP)

Ledger current as of 2026-10-23. A position and a citation, not accounting advice. See how we cite.