In a new report, the Association of Chartered Certified Accountants (ACCA) has highlighted that while blockchain or distributed ledger technology (DLT) could improve trust in financial transactions, the technology is more likely to support, rather than replace, the work of professional accountants.
The report, “Divided we fall, distributed we stand: a professional accountant’s guide to distributed ledgers and blockchain”, has been prepared to cater particularly to the community of professional accountants. It explores the potential areas for commercial blockchain applications and how the technology relates to accountancy and finance professionals.
“For the accountancy profession, distributed ledgers might help with tasks particularly linked to recording and tracking of information. In audit, for example, this might open up the possibility of basing the opinion on the entire data-set rather than a sample. Also, rather than relying on an annual snap-shot, a more on-going view of business performance might become possible”, Narayanan Vaidyanathan, head of technology insight at ACCA and lead author, said.
According to the author, trade finance and Know Your Customer (KYC) are among the key areas for blockchain applications. These are essentially the business processes characterized by inefficiencies, or lack of trust, or poor supply chain visibility.
“Initial explorations suggest that distributed ledgers increase trust in transaction data, but that the accountant’s role involves certain aspects of financial and organisational performance that are not solely linked to superior transaction management and therefore will not be directly affected by this technology”, the report said.
It noted that it will take time to estimate the impact of distributed ledgers on overall revenues for accountancy firms while adding that the effect on revenue mix might be clear sooner.
“There may be a gradual move away from low-margin activities (for example, transaction checking) towards a greater emphasis on higher-margin work (for example, interpreting technical accounting policy to a given situation). Over time, this may affect the revenue model, with greater emphasis on paying for expertise and advice (outputs-based rate card) rather than for time (inputs-based, per hour billing)”, the report added.
The author believes that the evolution in revenue mix depends on large scale and mainstream adoption of DLT. The report anticipates that this would become clear over next five years.
“If it looks likely that the revenue mix will evolve, then accountancy firms may want to evaluate their structure and organise themselves differently to prepare for the future”, it added.
