Lou Rohman, vice president of XBRL Services, Merrill Corporation | December 15, 2017
During his December 4 statement in connection with the 2017 AICPA Conference on Current SEC and PCAOB Developments, Wes Bricker, Chief Accountant for the SEC, provided a reminder about the critical importance of weighing “the possible effects of innovations in technology and commerce on the financial reporting obligations of issuers of securities to those who invest in the public capital markets.”
Right now, one technology stands out as the innovation which is likely to be the “elephant in the room” when it comes to upending accounting, financial reporting and the audit profession: Blockchain.
A Potential Game-Changer
Blockchain is a “distributed ledger” technology, meaning it’s a technology that enables the creation of a trusted ledger which is “distributed” and available to all appropriate parties.
For accountants, the simplest understanding of this technology is to think of the traditional accounts receivable ledger. Today it is maintained by the company that has the receivable on its books, while the other side of each transaction sits on the accounts payable ledgers of each of the companies that have a corresponding payable on their books. Blockchain technology handles this more efficiently since it allows for a distributed ledger that isn’t owned by any of the companies. Rather, one ledger exists which sits outside the walls of the companies and is trusted and shared by each company. And of course, one source of truth means the ledgers reconcile, are accurate and can be efficiently verified by outside parties, such as auditors.
That’s just the tip of the iceberg. Blockchain is an emerging technology that is likely to transform the accounting profession and many financial industries, such as banking…and beyond. It was a hot topic not only at the AICPA conference but also at FEI’s Current Financial Reporting Issues conference in November. And several sessions of XBRL International’s Data Amplified conference addressed how blockchain plays into financial communications.
For more information, I discussed more specifics about blockchain and its potential in a blog post more than a year ago.
Blockchain at the forefront
At the AICPA conference, it was no surprise to me that blockchain was the subject of the illustrative examples for each of the three points in Bricker’s statement on how the accounting profession can think about getting ready for innovative technology. It’s now at the forefront of financial technology discussions.
Blockchain will continue to rise in prominence and potential. Bricker pointed out during his statement, blockchain’s “possible uses may involve an issuer’s books and records, its system of internal control over financial reporting, its application of accounting standards and, correspondingly, the audit of its financial statements.”
It was evident at the AICPA conference that awareness of blockchain and weighing its potential impact on financial reporting obligations is key for SEC registrants and the accounting profession.