When Bitcoin’s first ledger was distributed back in 2009, the platform was designated solely as a platform for financial transactions. Bitcoin’s blockchain was specifically designed only to accommodate cryptocurrency transactions. But then competition entered by way of a new platform known as Ethereum. This new platform took blockchain out of the realm of cryptocurrency and made it a platform for developing applications.
Blockchain may still be recognized mostly within the cryptocurrency arena, but things are changing. In fact, they are changing so fast that CPAs should start preparing themselves now. Blockchain is going to change the game for CPAs whether they work independently or as part of a larger CPA firm.
For purposes of introduction, blockchain technology is built around a distributed ledger that can be used for tracking and maintaining all sorts of digital assets. It can be used to facilitate everything from accounting to supply chain management. According to CPA Practice Advisor, more than 80% of business executives surveyed in 2018 said their companies are now involved in at least one blockchain project.
That’s a lot to blockchain projects. If you’re a CPA, this is going to affect you in one way or another. Here are five ways blockchain is going to change the game:
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1. New Accounting Systems
The basic principles of accounting will not change with blockchain. Nor will the required tax knowledge CPAs are known for. But CPA firms will have to learn new accounting systems that accommodate blockchain. Just like they had to learn to use spreadsheets and databases in place of paper ledgers, they will have to learn how to work with blockchain.
2. New Digital Assets
Once blockchain is fully developed for accounting purposes, it will give new meaning to double entry accounting. CPA firms will have to account for new digital assets that may never have been part of the accounting picture before. How those digital assets are managed will be up to clients, but the CPA will be expected to advise accordingly.
3. Data Access Restrictions
CPAs must have ready access to all client financial data in order to effectively do what they do, explains Dallas-based Gurian PLLC. That will not change with blockchain, but data access may become more complicated. The heart and soul of blockchain is security. Everything from encrypted ledgers to private keys will play a role in who has access to what data. CPAs may have to adjust to the fact that they may not have access as free as it once was.
4. Irreversible Transactions
Another important component of the blockchain ledger is that it makes transactions permanent and irreversible once confirmed. Although this should not be a big deal to CPAs in theory, it may be in practice. Simple accounting mistakes that could have been fixed in the past with a few minor calculations become more complicated when ledgers cannot be altered. Time will tell how irreversible transactions will affect accounting.
5. A Bigger Advisory Role
Some of the work of accounting is likely to be eliminated by blockchain smart contracts. However, that doesn’t mean CPA firms will be out of business. They won’t. Rather, their roles will change. CPAs are likely to take on more of an advisory role rather than crunching so many numbers. They will probably find themselves more involved in tax advisory services in particular.
Blockchain is here to stay. What started as a means of trading online with digital currencies has ballooned into an application platform with nearly endless possibilities. Furthermore, blockchain is coming to accounting. CPAs should start thinking about it now.