Walmart Inc.'s requirement that leafy produce suppliers use blockchain to track their shipments is creating hundreds of hours of work for accountants, according to seven firms contacted this week by Bloomberg Tax.
As a result, accountants are quickly educating themselves on blockchain technology, digital ledgers and smart contracts, and how it all may complicate preparation of the balance sheet and other financial documents. That requires many hours of work, accountants said.
The number of companies that adopt the technology will grow, coming from a range of industries, in hopes of supplying Walmart, accountants said.
In addition, Walmart could expand the use of blockchain technology beyond produce and to other areas of its business, Amanda Wilkie, a consultant in technology at Boomer Strategies Inc., told Bloomberg Tax.
Making Food Safer
Walmart’s requirement of its suppliers of spinach and other leafy veggies to implement product-traceability software is part of an effort to ensure food safety.
The software—a digital ledger created by International Business Machines Corp.—will provide Walmart with data on how food got from the field to stores.
Being able to quickly identify the source of produce can be important for retailers. An E. coli outbreak earlier this year, which sickened more than 200 people, was traced back to romaine lettuce sourced from the winter growing areas in and around Yuma, Ariz.
“It was difficult for consumers to know how to determine where their lettuce was grown. None of the bags of salad had ‘Yuma, Arizona’ on them,” Frank Yiannas, vice-president of Food Safety at Walmart, said in a statement. “In the future, using the technology we’re requiring, a customer could potentially scan a bag of salad and know with certainty where it came from,” he said.
About 100 of Walmart’s leafy green suppliers will need to adopt the technology by September 2019. Walmart said in a statement to Bloomberg Tax that it plans to expand the requirement to other types of produce over the next year.
In advance of that deadline, suppliers are turning to accountants for their expertise. Suppliers want help in preparing to meet the compliance date, but they also want to understand how the technology works to see if it may provide advantages in other areas, including daily transactions, accountants told Bloomberg Tax.
“We are seeing a notable uptick related to companies expanding their use of blockchain, not just with supply chain fulfillment for Walmart, but in other areas of their business, as well,” Michael Rhodes, accountant and partner in the New York offices of Citrin Cooperman, told Bloomberg Tax.
“Many of our clients are still in the exploratory phase, but we are definitely having these conversations with our clients,” Rhodes said.
Learning to ‘Trust’ the Data
Accountants who understand the technologies involved in smart contracts and digital ledgers need to help suppliers gain some knowledge of the technology “so that they can trust the information that is coming out of it,” Wilkie said.
Smart contracts involve computer code used to verify and self-enforce agreements among parties without the need of a third party, such as an arbitrator or court.
“We have a client who is actually a big vendor for Walmart and is very concerned about the impact” of who owns the information contained in the smart contract, James D. Watson, a managing principal at CliftonLarsonAllen LLP, said Oct. 17 in New York at a program presented by the Wall Street Blockchain Alliance.
For our clients, “we really need to understand the entire transaction set,” he said.
Though his firm is not yet auditing the Walmart transactions, it is getting familiar with the digital ledgers and figuring out how to get to the underlying information, he said.
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