The Use of Artificial Intelligence to Determine Contingent Legal Liabilities Provisions : Centre for Financial Regulation and Innovation : White Paper

Broby, Daniel and Coulson, Andrea and Dörfler, Viktor (2021) The Use of Artificial Intelligence to Determine Contingent Legal Liabilities Provisions : Centre for Financial Regulation and Innovation : White Paper. Other. University of Strathclyde, Glasgow. (https://doi.org/10.17868/76898)

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Abstract

We suggest how Artificial Intelligence (AI) can help us make more accurate legal liability provisions under International Accounting Standards. International Financial Reporting Standards provide considerable guidance on how uncertain legal events should be recognized on the balance sheet. The process is subjective and, we argue, a more qualitative approach would be beneficial. We recommend the use of Artificial Intelligence to get a tentative outcome and a more reliable liability assessment for use in financial statements. This would provide a more true and fair view of the outcome of disputes. We discuss the theoretical and practical issues raised by using Artificial Intelligence to value provisions and propose a way of applying it to calculations of provisions under IAS 37.

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