How blockchain might transform corporate reporting
Alan Simpson CA comments on the recent FRC Lab report on Blockchain.
The FRC Financial Reporting Lab (the Lab) has just published a report called “Blockchain and the Future of Corporate Reporting: How does it measure up?”
In addition to describing the scope for using blockchain technology in financial reporting, it also makes useful background reading for all those who want to learn more (on a non-specialist basis) about blockchain generally. For example, the report also gives short explanations of what is meant by blockchain and has several pictorial examples of how it works and an overview of the process whereby new blocks on the chain are created.
Much has been said about the disruptive nature of blockchain, but not necessarily in relation to corporate reporting. This report from the Lab considers how current developments and potential use-cases of blockchain technology might impact corporate reporting processes in the future. It concludes that, whilst cost, complexity and lack of standardisation of blockchains might be inhibiting factors, the growing use of blockchain means that those involved in corporate reporting processes need to consider its potential disruptive impact.
Specifically, the following potential use-cases for blockchain are considered:
- in the production of corporate reporting: how transactions processed on a blockchain may help to improve accounting records;
- in the distribution of corporate reporting: how a blockchain based European corporate reporting platform (European Financial Transparency Gateway) may help to open up access to corporate reporting; and
- in the consumption of corporate reporting: how blockchain might help to rethink the way that reporting content is defined.
The report recommends actions for various groups who have an interest in this area including:
- Actions for standard setters and professional bodies - Regulators, standard-setters and professional bodies are encouraged to monitor blockchain developments and consider how they may impact corporate reporting. The report recommends the creation of a forum where all those involved in corporate reporting can share and learn.
- Actions for preparers and users of corporate reporting - Preparers and users should focus on gaining a greater level of understanding and consider experimentation and cautious innovation when costs and benefits are balanced.
At its heart, blockchain is a technology that promises greater trust and resilience in the recording of transactions and information. These are both essential elements in the system of corporate reporting. Whilst it is not clear whether blockchain is the answer, the current rapid developments in blockchain use mean that it has the potential to have a significant disruptive impact on corporate reporting processes.
- Phil Fitz-Gerald, Director of the Lab
Alan Simpson’s article on Cryptocurrencies, Bitcoin and blockchain