AI can draft the paper. Management owns the judgement

In summary

• For finance leaders facing ongoing cost pressures, the potential efficiency gains from AI are compelling

• However, technical accounting is not simply a research exercise. Significant accounting judgements require experience, scepticism and professional judgement

• Organisations that rely solely on AI-generated analysis risk flawed conclusions, incorrect references and avoidable audit challenges

• The most effective approach combines the speed of AI with the oversight of experienced technical accounting specialists, creating robust accounting assessment papers that stand up to audit scrutiny and support confident decision-making

CFOs, FDs and Heads of Finance are consistently under pressure to do more with less. This, fundamentally, is the nature of business.

Finance functions are widely expected to deliver faster reporting, support increasingly complex transactions and provide greater insight to boards and stakeholders. At the same time, many organisations remain focused on controlling costs and improving efficiency. Getting that balance right is often easier said than done.

It is therefore no surprise that AI is rapidly becoming a common part of the finance toolkit. The technology can analyse large volumes of information, extract key contractual terms, identify potentially relevant accounting standards and generate structured technical accounting assessments in a matter of minutes.

However, the challenge for finance leaders is not whether to adopt AI, but understanding where it adds value and where human judgement remains essential.

Many complex accounting issues do not have a single obvious answer. Whether assessing an acquisition, a debt restructuring, a complex revenue arrangement or a new commercial contract, management is often required to apply judgement to principles-based accounting standards.

AI is highly effective at gathering and organising information. It can extract relevant data and help structure an analysis. What it cannot do is assume responsibility for the conclusions reached. Ultimately, that remains with senior management.

A technical accounting assessment paper documents management analysis of a significant accounting issue and explains why a particular accounting treatment has been adopted.

Drafting the paper is often the easiest part of the process, with the difficult work happening beforehand. This includes understanding the transaction, identifying the commercial drivers, determining which facts are relevant, assessing potentially different interpretations and deciding which judgements and outcomes are more significant to investors and other stakeholders.

Consequently, at its best, the paper creates a clear connection between the commercial substance of a transaction and the accounting outcome reflected in the financial statements.

It demonstrates that management has:

• Considered the relevant facts and circumstances

• Identified the applicable accounting guidance

• Evaluated alternative accounting treatments

• Applied professional judgement

• Reached a reasoned and supportable conclusion

These papers are particularly valuable when transactions are complex, unusual or subject to significant judgement. Common examples include business combinations, complex revenue arrangements, contingent consideration, debt modifications, lease assessments, financial instruments, share-based payments, group restructurings and the adoption of new accounting requirements.

Many audit challenges arise because management has not clearly documented how it assessed the judgements and arrived at its conclusion.

Without appropriate documentation, finance teams can find themselves revisiting decisions, gathering evidence and responding to technical questions late in the reporting process.

A well-prepared assessment paper helps avoid these issues, providing a clear audit trail, demonstrating sound governance and allowing auditors to understand the basis for management's conclusions. It also creates consistency across reporting periods, while reducing reliance on individual members of the finance team who may hold critical knowledge.

In short, a robust assessment paper often prevents a technical accounting issue from becoming an audit issue.

The process of preparing a technical accounting assessment has traditionally been labour-intensive. Finance teams must review contracts, gather supporting documentation, identify relevant accounting standards and prepare detailed analyses.

AI can significantly accelerate these activities. When used appropriately, it can:

• Extract information from contracts and agreements

• Summarise large volumes of documentation

• Identify potentially relevant accounting standards

• Highlight areas requiring further investigation

• Generate structured first drafts

• Improve consistency and efficiency

For organisations operating under resource constraints, these capabilities can create substantial time and cost savings. This is where many finance functions are beginning to realise meaningful returns from AI adoption.

For areas that do not require significant judgement, AI can be an effective compliance tool, provided it has the right source information.

While the benefits are clear, the risks should not be underestimated. Large language models (LLMs) can produce convincing analyses that contain inaccurate interpretations, incorrect references or citations to accounting guidance that does not exist. The language is often persuasive enough that errors may not be immediately obvious.

AI is also only as reliable as the information it receives. If key contractual provisions are omitted, facts are incomplete, or the issue is framed incorrectly, the resulting analysis may focus on the wrong accounting question entirely.

Perhaps most importantly, AI cannot exercise professional judgement.

Accounting standards frequently require management to assess economic substance, weigh competing indicators and determine which factors are most relevant in the circumstances. These decisions require experience, challenge and scepticism. Crucially, they cannot be automated.

The most successful organisations are unlikely to treat AI and technical specialists as competing alternatives. Instead, they will use each where it delivers the greatest value.

AI can undertake much of the heavy lifting during the early stages of the process through reviewing documents, extracting data, identifying relevant guidance and preparing an initial draft assessment.

Experienced technical accounting specialists can then review the output, validate accounting references, challenge assumptions, assess alternative interpretations and confirm that the conclusions are reasonable and supportable.

This approach combines efficiency with technical rigour, reducing the cost and time involved in preparing assessments while maintaining confidence that significant accounting judgements will withstand challenge from auditors, regulators and other stakeholders.

AI is already changing how finance teams approach technical accounting, but the organisations that achieve the greatest value will not be those that replace professional judgement with technology. They will be those that use technology to enhance professional judgement.

Technical accounting assessment papers provide a clear example of this balance in practice. AI can accelerate research, drafting and analysis. Experienced professionals can ensure the conclusions are accurate, defensible and aligned with the underlying commercial reality.

The result is a faster, more efficient process without compromising the quality of financial reporting.