In the future, when all financial reporting moves to blockchain, a tech-savvy millennial buying a Candy Cane Frappuccino™ will be able to check Starbucks’ financial page and immediately see the company’s profits tick up a few cents.
The beginning of that future could arrive as soon as the first quarter of 2019, according to the chief executive of a company that hopes to make it happen.
“We’re basically going to stream our financial statements real-time as they occur,” Chris Danusiar, CEO of Auditchain GmbH, told Bloomberg Tax Dec. 12. “So there’s no ‘look back a month, look back a quarter, look back a year.’”
Danusiar made the comments on the sidelines of the American Institute of CPAs conference in Washington after a panel discussion on disruptive emerging technologies such as blockchain, which has the potential to revolutionize auditing and financial reporting.
The flood of questions from the audience made it clear to Danusiar and the other panelists that many still struggle to understand how blockchain will be used.
Blockchain holds promise for “every single sector,” yet there are many hurdles to implementation, said panelist Scott Zimmerman, CPA and partner at Ernst & Young LLP in New York. The biggest implementation challenges aren’t technological but emotional, Zimmerman said.
People have trouble understanding how blockchain works and don’t trust it, Zimmerman said. Many equate blockchain with cryptocurrencies like bitcoin, but the two are not the same. “Crypto requires blockchain, blockchain does not require crypto,” Zimmerman said.
At its core, blockchain is simply about transactions: it’s a ledger that everyone using the network is able to see. Danusiar likened it to an online list for a holiday party, where everyone can see who is invited and what food they will bring.
“The only difference is that you share with hundreds of thousands of people. And the system itself has logic in it,” he said. “The list is smart enough to make sure that the right people get invited and the wrong people don’t.”
Blockchain will be effective only if the digital data that goes into the system is an accurate reflection of the real world, panelists said. Once the data goes into the system, it never changes and everybody in the network can see it, so making sure it is correct before it goes into the system is crucial.
And everybody has to be on board for blockchain to really work, said panelist Allyson Laurance, Global Treasury and Trade Innovation Lead at Citigroup Inc. in New York. That’s a challenge, for example, in global supply chains, where transactions continue to rely on paper and rubber stamps, and are slow to get digitized.
“You’re only as fast as the slowest part of your chain,” Laurance said.
Auditchain may soon offer companies a real-time window into how blockchain could work when everyone is fully involved. The company, headquartered in Switzerland, plans to launch the first phase of its financial reporting ecosystem, complete with a digital system currency it will call AUDT tokens, in the first quarter of 2019.
The company expects to offer “real time reporting of financial statements” and “an open source library of GAAP and IFRS compliant smart contracts,” that will enable financial data to be deemed audited and reliable as soon as it goes up on the network, according to an FAQ on the company’s website, which shows how it will interface with U.S. generally accepted accounting principles and international financial reporting standards.
Network users will use tokens to gain access to a company’s financial statements, and companies can earn tokens by making the financial data available to others to view, Danusiar told Bloomberg Tax. Tokens can be exchanged for real-world currency.
The system will be suitable for private companies such as venture-backed startups, as well as publicly traded companies, non-profit organizations, and governments, the FAQ says.
Full coffee drink financials for everyone, of course, may still be a few years away.
“Getting to digital has to happen first,” said Zimmerman, calling emerging technologies “a long journey” that first needs to start with companies moving from paper to digital. For now, “let’s get focused on what’s making a difference in our profession,” he said, which is data analytics, automation, and, to some extent, artificial intelligence.
Once companies are fully digital, “blockchain will expand that universe,” he said. “But let’s walk before we can run.”
To read more from Financial Accounting News pleaseOR Request Trial