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Accounting News Roundup: Blockchain Replacing Auditors and Sustainability Accounting | 03.29.16

Posted on by Caleb Newquist

Sustainability accounting

I have no idea whether companies will embrace sustainability reporting or not, but a whole slew of firms are now "SASB Advisory Partners" who will "lend their expertise, tools and perspective to support the consideration and application of SASB standards." That sure gives the impression that companies will embrace sustainability reporting. Still, I don't get the sense that there's a huge demand right now. One recent-ish report found that only 1.4% of the S&P 500 used fully integrated reporting. "SASB plans to issue its last set of provisional standards on Wednesday" so maybe that's the start of the SASBumrush? Or this:

SASB will then enter a period of deep consultation to get feedback on the standards' decision-usefulness and cost-effectiveness. SASB's proposed process for codifying and maintaining the standards will open for public comment on April 7.

That's probably good because anarchy accounting sounds like it makes people nervous:

"A random mix of ESG data, without form or purpose, could create more confusion for companies and their investors," said Evan Harvey, managing director of corporate sustainability at Nasdaq. "SASB's Advisory Partners can clear up this confusion by improving the quality of ESG information, so that it proves the equal of financial information."

Okay, sure. I mean, some day, probably, accountants will count everything but I don't think anyone will jump without rules in place. It's still accounting, after all.

Blockchain and auditing

"Blockchain Technology Could Put Bank Auditors Out of Work" says this:

At a recent blockchain-focused event in Toronto, Bitcoin Core contributor Peter Todd was asked to explain the reasoning behind Wall Street’s increased interest in blockchain technology. During his initial response, Todd pointed out some of the mistrust that exists in the current financial system:

    “The dirty secret is [the banks] don’t actually trust [their databases]. I mean, they don’t trust their own employees. … They don’t trust each other. There’s so many levels of mistrust here.”

I kinda don't think the mistrust is a really secret, is it? I mean, that's why we have the SEC Acts and mountains of banking regulation, right? Anyway:

Todd then discussed the massive industry built around financial audits. He noted:

    “If they did trust all this stuff, why are there so many auditors? Why is there this massive infrastructure of labor-intensive human beings sitting there poring over transactions and trying to figure out where the money got created out of thin air. Where did the money disappear? Who moved what where? Was it all legit?”

Todd then says, "For the most part, bank fraud is at tolerable levels, it seems," which is wonderful. But also, no fraud would be wonderful and that's where the blockchain comes in. It's supposed to "get to the point where we can imagine getting rid of human beings." And sure, it'll get rid of some humans, maybe a lot of humans, but won't new human auditors have to understand the underlying technology? Interpret the results? Make sure that it's being used appropriately? Or will this be an utopian auditing environment with 100% real-time, error-free assurance that never, ever needs human interaction again? Gah! That's scary. Or boring. Or scary boring.  

Elsewhere, in blockchain-y things, a new PwC report calls distributed ledgers a "once-in-a-lifetime" opportunity for financial services "to transform the industry to their benefit, or not" and here's "The Smart Contract Powered Triple-Entry Accounting System." (via Matt Levine)

PwC and Valeant

Of all the audit engagements you wouldn't want to be on this busy season, I think Valeant Pharmaceuticals would rank near the top:

[PwC] will now play an even more crucial role in determining Valeant’s standing. After missing a deadline for filing its annual report for 2015, Valeant said it was working to get the report out by April 29. PwC, however, may take more time to sign off on the financial statements, causing Valeant to miss its new projected filing date.

Regulators may now also take a close look at Valeant’s accounting. The company said last month that the Securities and Exchange Commission was investigating.

Hang in there, people.

Previously, on Going Concern…

Blake Oliver explained how accountants can not suck at marketing. And in Open Items, someone who forgot everything from school wants to know how to prep for the CPA exam.

In other news:

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The board that sets accounting standards for state and local governments on Wednesday changed some financial reporting requirements for swaps and other hedging instruments the governments use. The Governmental Accounting Standards Board said that “deferred outflows” and “deferred inflows” of resources should be reported separately from assets and liabilities on financial statements.

Raters Put U.S. on Notice [WSJ]
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Fan Who Returned Ball Is Reaping Rewards [WSJ]
On Wednesday, the 23-year-old from Highland Mills, N.Y., was guaranteed at least a $50,000 donation, given a 2009 World Series ring, and got an offer to have his taxes covered should the IRS not consider the items Lopez received Saturday gifts. In case there are still some contrarians who believe Lopez didn’t make the right decision, Topps announced Lopez will also have his own baseball card. “It’s an incredible feeling,” Lopez said yesterday at Modell’s Sporting Goods in Times Square, his newfound public relations team not far from his side. “Never ever would I have expected this, so it’s a cool thing.”

ConocoPhillips to Split Into Two Businesses [DealBook]
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Small Firms Defend LIFO [In Charge/WSJ]
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White House threatens veto for bill defunding Wall Street reform [The Hill]
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EU’s Barnier says won’t budge on accounting rule [Reuters]
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