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I don't think this could happen in a world dominated by blockchain. Blockchain basically makes unnecessary all the layers of internal and external accounting c

I don't think this could happen in a world dominated by blockchain. Blockchain basically makes unnecessary all the layers of internal and external accounting controls because it "automates" trust. Th big issue here is the auditor's unwillingness to sign off on Toshiba's financials. In other words independent professional accountants simply don't trust Toshiba's numbers. That's a much bigger deal than any loss, precisely because we don't really know how bad the losses are. And apparently, this has been a recurring issue with Toshiba, which is one reason they may get de-listed. You may think that back-office accounting is straightforward and has been automated. It hasn't, in part because we lack a technology that is a good replacement for the trust that is generated by audited financial statements. The only technology that I see doing this is distributed ledger tech (aka blockchain). If anyone asks what's a potential revolutionary use case for blockchain - point to Toshiba.

acchow 9y ago
Accounting is way more than tracking the flow of money.
arkis22 9y ago
In my opinion, accounting can not be boiled down to something as simple as blockchain. Any inputs that you put into the chain would probably still need to be vetted by accountants. There's GAAP, industry practices, and even individual firms can have the flexibility to account for things differently. You still have the same problems. Literally the best middle class+ job you can get is being an accountant. Until the government collapses they will always have work.
JumpCrisscross 9y ago
> In other words independent professional accountants simply don't trust Toshiba's numbers Let's talk about the "going concern" assumption in accounting [1] by considering the depreciation of a capital asset [2]. Say you buy a power plant for $10 billion. It will generate $1 billion in gross profits every year and you expect it to last 50 years. Using cash accounting, you make -$9 billion in year 1 and $1 billion every year thereafter. While that treatment may be valuable to a corporate treasurer, it's of limited use to an investor (or government) trying to measure economic value. This is why we let businesses mark depreciation against certain assets. Accountants may choose from one of many depreciation models [3]. Suppose you choose the straight-line method. You divide the capital cost by the expected life and then write off that much of the asset's value each year. Our 50-year plant thus generates $800 million in gross annual accounting profits [4]. Much more useful! There's a hitch, however. If the company goes Chapter 7 [5] six months in, your 50-year timeline looks silly. The company didn't "make" $800 million. It lost $9.5 billion. Predicting how long companies will live is complicated. So accountants simplify. If a company looks reasonably sturdy, they make a "going concern" assumption. This assumes, ceteris paribus, that if the company isn't going under in the near future we assume it lasts into perpetuity. (Due to how the time value of money works, this is a gentler assumption than it seems.) When an accountant says they can no longer assume a company is a going concern, they aren't saying "fraud". They're saying they can't keep assuming it will exist in the future. It signals distress as well as a switch from long-term to liquidation-type accounting. You could scream "blockchain blockchain blockchain" at the auditors and investors all day long, it won't change that this is a necessarily subjective call. [1] http://www.investopedia.com/terms/g/goingconcern.asp http://www.investopedia.com/terms/g/goingconcern.asp [2] http://financialmodelingtutorial.com/capital-expenditures-and-depreciation/ http://financialmodelingtutorial.com/capital-expenditures-an... [3] http://www.principlesofaccounting.com/chapter-10/depreciation-methods/ http://www.principlesofaccounting.com/chapter-10/depreciatio... [4] $1 billion / ($10 billion / 50 years) [5] http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy...
- mikeyouse 9y ago
  Thank you. It's striking to me how often the loudest proponents don't really understand what they're trying to replace.. Verifying cash balances is trivial, reconciling bank accounts, receivables, etc. are all trivial. Moving those actions to the blockchain would save some first year accountants a few minutes every audit season.

acchow 9y ago

Accounting is way more than tracking the flow of money.

arkis22 9y ago

In my opinion, accounting can not be boiled down to something as simple as blockchain. Any inputs that you put into the chain would probably still need to be vetted by accountants. There's GAAP, industry practices, and even individual firms can have the flexibility to account for things differently. You still have the same problems. Literally the best middle class+ job you can get is being an accountant. Until the government collapses they will always have work.

JumpCrisscross 9y ago

> In other words independent professional accountants simply don't trust Toshiba's numbers Let's talk about the "going concern" assumption in accounting [1] by considering the depreciation of a capital asset [2]. Say you buy a power plant for $10 billion. It will generate $1 billion in gross profits every year and you expect it to last 50 years. Using cash accounting, you make -$9 billion in year 1 and $1 billion every year thereafter. While that treatment may be valuable to a corporate treasurer, it's of limited use to an investor (or government) trying to measure economic value. This is why we let businesses mark depreciation against certain assets. Accountants may choose from one of many depreciation models [3]. Suppose you choose the straight-line method. You divide the capital cost by the expected life and then write off that much of the asset's value each year. Our 50-year plant thus generates $800 million in gross annual accounting profits [4]. Much more useful! There's a hitch, however. If the company goes Chapter 7 [5] six months in, your 50-year timeline looks silly. The company didn't "make" $800 million. It lost $9.5 billion. Predicting how long companies will live is complicated. So accountants simplify. If a company looks reasonably sturdy, they make a "going concern" assumption. This assumes, ceteris paribus, that if the company isn't going under in the near future we assume it lasts into perpetuity. (Due to how the time value of money works, this is a gentler assumption than it seems.) When an accountant says they can no longer assume a company is a going concern, they aren't saying "fraud". They're saying they can't keep assuming it will exist in the future. It signals distress as well as a switch from long-term to liquidation-type accounting. You could scream "blockchain blockchain blockchain" at the auditors and investors all day long, it won't change that this is a necessarily subjective call. [1] http://www.investopedia.com/terms/g/goingconcern.asp http://www.investopedia.com/terms/g/goingconcern.asp [2] http://financialmodelingtutorial.com/capital-expenditures-and-depreciation/ http://financialmodelingtutorial.com/capital-expenditures-an... [3] http://www.principlesofaccounting.com/chapter-10/depreciation-methods/ http://www.principlesofaccounting.com/chapter-10/depreciatio... [4] $1 billion / ($10 billion / 50 years) [5] http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy...

mikeyouse 9y ago
Thank you. It's striking to me how often the loudest proponents don't really understand what they're trying to replace.. Verifying cash balances is trivial, reconciling bank accounts, receivables, etc. are all trivial. Moving those actions to the blockchain would save some first year accountants a few minutes every audit season.