The media expounds daily on how accountants will become obsolete in the Fourth Industrial Revolution (4IR). Their work, it says, will be taken over by robotic process automation (RPA), or software bots for short, and their analytical functions will be assumed by artificial intelligence (AI).
 
“In fact, 4IR could be the ‘extinction event’ the Profession has been hoping for,” says Shahied Daniels, Chief Executive of the South African Institute of Professional Accountants.
 
Adapt or die
Both businesses and Professional Accountants are constantly exposed to the “stick” argument, that either practitioners find ways to add more value to their services or become redundant in the face of emerging technologies. According to Daniels, there’s a strong “carrot” side to the story.
 
“For too long, highly trained accountants have been held back from realising their true potential as trusted business advisors by menial data administration and laborious number crunching,” he says. “Rapid advances in technology will take the pain out of accounting and free the practitioner to focus on service delivery excellence and diversifying their offerings.”
 
Less data capture
Much of an accountant’s work is administrative in nature and is sometimes considered to be nothing more than a necessary evil that cannot be avoided. But RPA applications have become affordable enough to perform traditional data entry. Further, AI and data analytics systems can assist with the heavy number crunching on which the practitioner’s talents are often wasted.
 
Less physical measuring
It’s not unusual for an accountant to, for example, fly out to an oil rig and spend a week personally checking output levels. They are so often called on to give assurance on non-financial information that a dedicated standard exists to regulate such activities. Now, companies can attach cheap sensors to the appropriate equipment and have the desired information transmitted over the Internet of Things (IoT) directly to their management information system (MIS). This allows AI-driven data analytics to not only validate the measures but also predict future performance.
 
Accelerated delivery
An important aspect of RPA and AI is the speed with which work can be completed. Decision-making is time sensitive but the required administration and reconciliation of accounts, and subsequent compilation of management reports, can sometimes take weeks. New technologies can reduce decision-making delays and allow leaders to respond to business conditions in near real time. It also empowers accountants to focus on outputs and their impact rather than the truth and accuracy of inputs, which is assured by the business system itself.
 
A shock to the system
Accountants who find themselves relieved of their traditional duties may feel like a fifth wheel in a system they helped build. Daniels believes it is an ideal time for them to reflect on their true purpose. “The Professional Accountant has been forced by systemic inadequacies to operate more at the points of input and processing,” he says. “They must now embrace a paradigm shift and discover the full spectrum of opportunities that exist beyond the point of output.”
 
SAIPA, in collaboration with its parent body, the International Federation of Accountants (IFAC), of which it is a voting member, continues to work closely with its members to prepare them for 4IR through expert support, future-ready competency frameworks and technology-aware accounting standards.
 
ENDS
 
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants
 

According to the South African Institute of Professional Accountants (SAIPA), changes to the International Financial Reporting Standards (IFRS) are aimed at avoiding another global financial crisis. This is in response to the backlash against IFRS 17 Insurance Contracts from critics in the insurance industry.
 
Says Faith Ngwenya, Technical and Standards Executive at SAIPA: “We need better reporting standards to protect the global economy and the world’s collective public interest. The IASB works with organisations to make implementation easier. However, these standards are not developed to help businesses become more profitable but to make their financial sustainability transparent to unsuspecting investors.”
 
Industry resistance
The IFRS comprises some 45 standards that dictate how various accounting elements must be presented on an organisation’s financial statements to make its financial health apparent to its stakeholders.
 
The IASB introduced IFRS 17 in May 2017 with the deadline for adoption set for 2021. However, insurance industry leaders have criticised the standard’s complexity and general compliance issues. As a result, the IASB recently made several changes to the requirements and delayed implementation to 1 January 2022.
 
Standards to avert the next financial crisis
According to one CNN report, countries took such drastic steps to restart their economies that, if the world faces another global financial crisis, they might not be able to recover at all.
 
Further, in its Financial Stability Report of 2017, the International Monetary Fund (IMF) warned that: “Risk assessment in the insurance sector suffers from opaque and heterogeneous financial disclosure and deficiencies in the accounting and regulatory regimes.” It also warned that, in seeking greater yield, insurers have taken on more liquidity risk and credit risk, with their holding of lower-grade bonds having increased significantly.
 
The aims of IFRS 17
During a speech last year, Hans Hoogervorst, Chair at the IASB, explained the reasons behind the development of IFRS 17:
 
First, the liability of an insurer will be properly declared and, being regularly updated, will provide a more accurate view of its status. So increasingly risky equity positions will become noticeable sooner.
 
Second, IFRS 17 prohibits insurers from taking profit until the service is actually provided. Hoogervorst says that in some parts of the world, profits on long-term contracts, like annuities, are taken upfront, skewing the firm’s actual profitability.
 
Third, insurers tend to average their profitability over different generations of contracts. This practice means that poor profitability in the present financial year is camouflaged by good profitability in previous years, hindering investors from discerning current earnings trends. IFRS 17 will ensure that declining profits become obvious to the public.
 
The urgency of adoption
Some insurers are proceeding with implementation while others continue to push for more concessions. SAIPA says the IASB needs backing from governments and global organisations, like the IMF, to ensure the standards are adopted as soon as possible.
 
“Noting the IASB’s valid reasons, we mustn’t forget why this and other new standards have been introduced,” says Ngwenya. “We’re trying to avert another global financial crisis. Push-back from the industry only increases the risk and delays stability.”
 
Ngwenya invites insurers to approach their Professional Accountants, as business advisors, to find the most efficient ways to implement IFRS 17 by the deadline.
 
ENDS
 
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

Photo Credit: Neels Kleynhans | NKPhotography 
Photo caption: Thesis Winners (top left to bottom right)
Justin Logies, Masters: Accountancy, Wits University and Mr Shahied Daniels, CEO: SAIPA
Received on behalf of Dr Rajendra Rajaram, PhD: Accountancy (Business Rescue), UKZN and Kantha Naicker, Chair: SAIPA
Ester Aletta Jacomina Terblanche, PhD: Accountancy, UNISA
Remerta Basson, Masters: Taxation, Stellenbosch University and Mr Ettienne Retief
 Dr Teresa Michelle Pidduck, PhD: Taxation, Rhodes University Kantha Naicker, Chair: SAIPA

On 14th August, the South African Institute of Professional Accountants (SAIPA) hosted its Thesis Competition awards ceremony which recognises outstanding achievements in accounting and tax research. The competition has been held annually for the last ten years.

"It is our goal to encourage substantial increases in the volume and quality of research projects being conducted to ensure our industry remains at the cutting edge of thought leadership," says Faith Ngwenya, Technical and Standards Executive at SAIPA, who presented the winners with their awards.

The ceremony was performed during a gala dinner as part of SAIPA’s Accounting iNdaba 2019, a three day conference with the theme of “The Future-Ready Accountant in the 4th Industrial Revolution”.
​
The need for quality research
Ngwenya notes that 4IR technologies, like AI and robotic process automation (RPA), are already absorbing traditional accounting duties. This will free Professional Accountants to focus on providing business advice on the strategic direction of their clients and employers.

"It then becomes imperative that the Profession is informed by deeper insights and empirical evidence into the dynamics of business, finance and law that impact organisations as they strive to win market share,'' she says. Better research in these areas is therefore crucial.

PhD winners
The following PhD students were awarded for their submissions:
Dr Aletta Terblanche of UNISA for Developing Critical Thinking In Auditing Students Through Technology-Based Educational Interventions: A Conceptual Framework in the Accountancy category.

In the Taxation category, Dr Teresa Pidduck, a former Rhodes University student, for The South African general anti-tax avoidance rule and lessons from the first world: A case law approach.

Dr Rajendra Rajaram of UKZN for Success Factors For Business Rescue In South Africa in the Accountancy category.

Masters winners
Winners for the Masters degree submissions were:
Remerta Basson of Stellenbosch University for The applicability of section 24I of the Income Tax Act No. 58 of 1962 to bitcoin gains and losses in the Taxation  category.

Also in the Accountancy category, Justin Logie of Wits University for Accounting for inventory: a synthesising of Accountability and Neoliberalism.

Recognition
Every winner said their selection was unexpected. “There are so many other research projects out there, so I honestly didn’t expect to win; it was a complete surprise to me,” said Basson. “It encourages me to pursue further research.”
“I didn’t know if my research would be of value to others, but winning this award affirms that it is,” remarked Terblanche.

They also commended SAIPA for holding one of the very few competitions that recognise and encourage research excellence in accounting and taxation. “I don’t know of any other contests of this nature and, without them, research suffers,” said Dr Pidduck.

According to Logie: “SAIPA’s award helps overcome the perception that all accounting problems are practical and therefore do not benefit from theoretical solutions.”

Commitment to research excellence
Shahied Daniels, Chief Executive at SAIPA, confirmed  that the Institute will continue to nurture research through its annual Thesis Competition. “We are committed to ensuring that accounting evolves rapidly in response to advances in 4IR - and now even 5IR. That vision is dependent on strong, forward-thinking research, which we support wholeheartedly,” he said.

Both Daniels and Ngwenya congratulated all the winners for their outstanding achievement and wished them great success in their future endeavours.

ENDS
​
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

Attendees at the Accounting iNdaba 2019 had mixed feelings about the impact of the Fourth Industrial Revolution on the Accounting Profession.
 
The iNdaba, now in its second day, is being hosted by the South African Institute of Professional Accountants from 13th to 15th August at the Cape Town International Convention Centre.
 
The theme of the event is "The Future-Ready Professional Accountant in the Fourth Industrial Revolution".
 
"The contrast in attitudes among delegates is the best indicator that the iNdaba is a timely and much needed intervention," says Professor Rashied Small, Executive: Education and Training at SAIPA. "It's imperative that we start a conversation around this topic without delay and that is the goal of this conference."
 
Doom and gloom
Of those interviewed, some thought the acceleration in the application of 4IR technologies spelled the end of their accounting career. "The conference has opened my eyes to what's really happening," said one accountant. "The more I hear about these things, the more I feel I'm becoming redundant," said another. Yet another observed: "I realise I need to start training now to be employable in the next five years."
 
Irrelevance
Others saw 4IR as irrelevant to their market segment. "I work with small businesses who can't export their data to CSV format without my help," reported an SMP owner, who said the greatest impact would be felt at corporate level. "I doubt I will have to worry about them replacing me with AI and automation."
 
Bureaucratic restrictions
One public sector accountant felt that red tape and bureaucracy will hinder the implementation of technology in government entities. "We still create financials in Excel and export the data to Word for formatting into reports," he said. "There are no integrated systems to help us. I don't see this changing in the next ten years if it is not driven from the top."
 
Opportunity
Several attendees accepted the technological revolution as a boon. Said one government employee: "It takes me two weeks to prepare financial statements after month end, by which time the information is irrelevant. I'm excited because machines can take over the posting and number crunching, allowing me to focus on offering strategic guidance to my superiors."
 
Confidence and training
Conversely, another delegate revealed a need for training in soft skills and leadership to gain confidence as a trusted business advisor. "I'm just an accountant. I can't tell the CEO of the company what to do. If I get my facts wrong, I'd get fired," he said. "That's why we need to learn data analytics, because we need to make sure we get our facts right," retorted his colleague.
 
Self-education
"As we can see, people hold a diverse range of feelings and opinions on 4IR," says Professor Small. "If these attitudes are driven by poor information then their response to it will be ill conceived."
 
Small encourages all Professional Accountants to educate themselves in terms of their understanding of 4IR. As their traditional work is taken over by automated processes, they must also equip themselves with the skills required to act in a business advisory capacity.
 
ENDS
 
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

The 13th of August was the first day of the South African Institute of Professional Accountants' (SAIPA) Accounting iNdaba 2019. The event is being held until 15th August at the Cape Town International Convention Centre.
 
The iNdaba seeks to start a conversation throughout the Professional Accounting community to answer the questions: how will the 4th Industrial Revolution affect the Profession and how should accountants prepare themselves for those imminent changes? Its theme is "The Future-Ready Professional Accountant in the Fourth Industrial Revolution".
 
However, the conference is also delving into hot topics like ethics and restoring trust in the Profession, and the adoption of IPSAS in public sector accounting.
​
The first session of the day welcomed Arthur Goldstruck of World Wide Worx to the stage, who presented his firm's findings on 4IR adoption in South Africa. Goldstruck explained that uptake of the technologies, especially AI, was slow. He encouraged the audience to recognise and embrace the benefits of these advances in information analysis and process automation.
 
He was followed by Saadiya Adam, IRBA Professional Manager: Ethics, who guided attendees through the updates to the IESBA Code of Ethics as well as the body's new eCode. The eCode provides an easily accessible online resource that allows practitioners to rapidly locate desired clauses using intelligent search capabilities. This, and other resources provided by the body, will help Professional Accountants to be more aware of the provisions of the Code.
 
A panel of experts, hosted by SAIPA's Ettiene Retief, then discussed how to rebuild trust in the Profession and the requirements for achieving that goal. They agreed on several risks, notably that the culture of delighting customers as a primary business goal could obscure the Professional Accountant's and auditor's obligation to their fiduciary duties.
 
After a short break, Bernard Agulhas, CEO of the IRBA, shared the regulator's initiatives to ensure greater independence and accountability of auditors. Agulhas highlighted the behaviours that led to misconduct, and environmental changes his organisation was investigating to discourage them. These include mandatory rotation of auditors.
 
Next, Faith Ngwenya of SAIPA hosted a panel discussion on SMEs as an engine of economic growth. Participants agreed that small businesses provided vital goods and services and needed greater support to help them overcome difficulties in their early stages.
 
After lunch, the iNdaba continued to unpack 4IR with two presentations. The first was delivered by Professor Hanlie Smuts, who discussed considerations when pursuing digital transformation. She explained that organisations needed a clear strategy and highlighted the skills Professional Accountants would require in the future. These include increased emotional intelligence; the ability to learn, unlearn and relearn; the ability to adopt new technology strategies; and the ability to apply creative thinking. She was followed by Jodi Joseph of CaseWare who also covered 4IR technologies, including practical Blockchain and IoT applications, and data analytics.
 
The day's proceedings closed with a final panel, hosted by SAIPA's Professor Rashied Small, whose team of industry experts discussed the effects of 4IR on the Profession. The first day was a great success, with delegates adjourning for a cocktail party in the evening.

ENDS

MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

Will 4IR technologies kill the Accounting Profession? "Only if accountants remain the same and refuse to embrace it," says Arthur Goldstruck, CEO at World Wide Worx.
 
Mr Goldstruck was speaking from the South African Institute of Professional Accountants' (SAIPA) Accounting iNdaba 2019, being held from 13th to 15th August at the Cape Town International Convention Centre. This inaugural event explores 4IR and its impact on the Accounting Profession under the theme: "The Future-Ready Professional Accountant in the Fourth Industrial Revolution".
 
4IR adoption
According to Fourth Industrial Revolution in South Africa 2019: Enterprise uptake and expectations for emerging technologies, based on research carried out by World Wide Worx, South African adoption of 4IR technologies is low. “Only 13% of corporate South Africa is currently using AI in 2019, exactly the same as the previous year. Of the rest, 21% plan to adopt the technology in the next 12 to 24 months,” says Goldstruck.
 
This is in contrast to a survey conducted by the firm in 2018 in which 63% of non-users indicated they would invest in AI. 43% of those cited cost as the main constraint for not doing so.
 
Goldstruck says the reason for the large decline is that organisations, having moved past the hype around artificial intelligence, have come to realise that AI projects are costly. "The software itself is cheap and readily available as online services," he says. Rather, it is the skills and expertise required to make it work that are lacking, with that scarcity driving expenses up.
 
With regards to other 4IR technologies, 50% of companies currently use basic automation, 25% use IoT and 19% use Cloud computing.
 
However, 90% say they believe they will become reliant on those technologies in the future, and 99% expect that using them will result in a measurable increase in efficiency.
 
Delay in Cloud adoption
As cloud computing becomes an everyday part of our lives, World Wide Worx also asked companies what obstacles they faced in moving their business online.
 
The top reasons were poor connectivity and that it was too complicated. However, Goldstruck's firm found that as connectivity improved, the perceived complexity reduced noticeably.
 
When it comes to financials, 55% of companies continue to use a desktop accounting package while 22% have migrated to Cloud-based accounting software.
 
Conversely, robotic process automation (RPA), a technology that allows repetitive data entry tasks to be automated through programmable software robots, has become increasingly cheaper and readily available.
 
"A year ago, only 6% of South African enterprises were using robotics. Then came the RPA explosion. Now the figure stands at 37%,” writes Goldstruck in the report.
 
RPA can be used to automate many of the bookkeeping and data input duties currently performed by accountants. Although this creates a risk to the Accounting Professional, the opportunities introduced by the technology are more appealing.
 
Embracing technology
Goldstruck concluded his presentation by assuring Professional Accountants that 4IR technologies are not the enemy. They should rather embrace these advances in information and transaction processing to create a measurable competitive advantage for their employers or clients, and their practice.
 
ENDS

MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

The South African government has instituted various projects to ensure the country becomes a major player in the 4th Industrial Revolution. According to Shahied Daniels, Chief Executive at the South African Institute of Professional Accountants (SAIPA), the government’s initiatives and strategies will keep technology, now a valuable national resource, from being monopolised by a few big industry players.
 
“The specialised knowledge and skills required for successful 4IR adoption must be evenly gifted to a new generation of labour force and entrepreneurs. This will drive equitable growth and promote inclusive enrichment for all South Africans,” he says.
 
SAIPA will be focusing on these and other concerns at its inaugural Accounting iNdaba, to be held at the Cape Town International Convention Centre from 13th to 15th August. Prominent speakers include Arthur Goldstruck of World Wide Worx and well-known radio and TV personality, Peter Ndoro, as well as numerous ambassadors of local and international professional organisations.
 
South Africa to lead
In an interview on Cape Talk Radio in April, Communications Minister Stella Ndabeni-Abrahams noted that in the past, South Africa had been a consumer of technologies created by others.
 
This time, she stated, “our aim is to take a completely different direction” and government's programmes will “enable people to program the machines, including making them.” This implies the State aims to pursue 4IR to the point where the country is capable of producing competitive, home-grown digital skills, systems and equipment.
 
4IR initiatives
The Minister’s own capacity building programme was launched last year under the theme of “Building a Capable 4IR Army”. Called the Tshepo One Million Programme, its goal is to train one million young people in data science and related skills by 2030.
 
Speaking at the 4IR Digital Economy Summit held in Johannesburg earlier this month, President Cyril Ramphosa announced new subjects to be introduced at schools to prepare students for 4IR careers. These include data science and analytics, artificial intelligence (AI), blockchain, additive manufacturing, robotics and quantum computing.
 
The President also established a 30-member Presidential Commission on the Fourth Industrial Revolution to advise the government on leveraging opportunities presented by 4IR. The commission’s deputy chair is the University of Johannesburg’s Tshilidzi Marwala, a leading expert in the theory and application of artificial intelligence to engineering, computer science, finance, social science and medicine.
 
The Department of Science and Innovation’s (DSI) Data Science for Impact and Decision Enablement (DSIDE) programme, hosted at the CSIR, aims to build capacity by inviting university students to develop feasible solutions to real-world problems using data science.
 
Another DSI programme, the South African Research Chairs Initiative (SARChI), was established in 2006 to build research and innovation capacity at public universities. Its aim is to encourage strong local research and innovation leadership in South Africa.
 
In addition, the DSI will open a South African Affiliate Centre of the World Economic Forum's Centre for the Fourth Industrial Revolution Network. This will assist the country in developing robust policy frameworks in collaboration with global stakeholders to ensure real benefits are realised from science and technology.
 
Conclusion
“These and other initiatives indicate the government is serious about achieving its 4IR mandate in a manner that serves society as a whole and fosters equality,” says SAIPA’s Daniels.
 
Daniels reports that SAIPA is also contributing through its collaboration with the International Federation of Accountants (IFAC) to develop 4IR-ready accounting. “Professional Accountants have a significant role to play as trusted business advisors in terms of 4IR strategy development,” he concludes.
 
 
ENDS

 
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

“As automation and AI invade and occupy business services once exclusive to Professional Accountants, practitioners must reassess their value proposition,” says Faith Ngwenya, Technical and Standards Executive at the South African Institute of Professional Accountants (SAIPA).

Accountants are being advised by their professional accounting bodies (PAOs) to focus more on business advisory engagements. But what makes a good business advisor? To grasp that concept, says, Ngwenya, one must first understand the four types of accountants.

The bean counter
Offering only the standard accounting services, the bean counter knows where the beans are and how to count them. In other words, they are intimately familiar with their enterprise’s ledger and can perform the required financial reporting. However, they neither understand the operations behind the figures nor can their outputs provide analytical or predictive insights to help the business grow. The bean counter can be replaced with AI and automation.

The bean mathematician
The bean mathematician also knows the enterprise’s accounts very well. Additionally, they possess advanced reporting and analytics capabilities when it comes to counting the beans. As such, they are able to offer predictive insights and unpack financial dynamics. But because they still can’t see how their figures relate back to business operations, they can’t prescribe transformational changes.  They are more concerned about compliance with standards and regulations such as tax authorities. The mathematician can be replaced with the analytical power of AI.

The bean physicist
The bean physicist knows where the beans come from, this is, they have an impressive grasp of how business operations affect their accounts. Unfortunately, they have only basic reporting skills and can’t project the future effects of those operations or suggest strategic optimisations. The physicist is not easily replaced with technology but is also not effective in enabling business growth or transformation. They are mainly problem solvers.

The business enabler
The business enabler has both a strong grasp of the business operations that produce the financials and advanced analytical and predictive capabilities. They provide data-driven insights into business growth and transformation opportunities, plus they can suggest practical operational improvements to achieve business development initiatives. They also know how to leverage technologies, like AI, predictive analytics, Cloud and more, to derive maximum value from financial and management data, creating a true competitive advantage.

In addition, they know their employer's or client's organisation inside out. So they understand the constraints it faces and can expose opportunities it may be missing both internally and in its market. Most importantly, they have evolved soft skills like rapport building, communication, collaboration and emotional intelligence, empowering them to create better, inclusive solutions that have total buy-in from stakeholders.

“The business enabler is involved in more than just financial management,” says Ngwenya “They’re invited to consult on risk management, business rescue, business development, IT and management information systems, and much more.”

The future of accounting
Professional Accountants who nurture the business enabler mindset while striving to develop the competencies of a business advisor will be in greater demand, even as technology absorbs their traditional services. Artificial intelligence can replace a lot of things but professional judgement is one skill that will hardly be replaced. Professional accountants of the future will remain relevant if they continually develop themselves, not only on routine compliance areas but sharpening their cognitive skills and business advisory skills. To find out more about the coming changes and how to address them, join SAIPA for its Accounting iNdaba 2019, to be held from 13th to 15th August at the Cape Town International Convention Centre. You can register now at www.saipa.co.za/accounting-indaba-2019.

ENDS
 
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African Institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

Authored by: Faith Ngwenya, Technical and Standards Executive at the South African Institute of Professional Accountants (SAIPA)

On the 18th of June, Facebook announced its plan to launch its Libra cryptocurrency in 2020. Bitcoin, the popular digital currency, has been around for over 10 years but hasn’t significantly changed how we trade. However, Facebook’s massive global user base could usher in wide-scale adoption of Blockchain, the technology behind modern cryptocurrencies.

Blockchain is just one of the 4th Industrial Revolution topics being presented at SAIPA’s Accounting iNdaba 2019, to be held from 13th to 15th August at the Cape Town International Convention Centre. So it’s a good time to review the technology in layman’s terms.

What problem does Blockchain solve?
With physical money, each unit represents a quantity of value traded and therefore redeemable as goods and services. It’s tightly controlled to ensure its units are uniquely identified and resistant to duplication. Because it’s physical, only one person at a time can possess and spend it.

Digital currency is simply a computer file that can be copied, so the same unit could be spent at the same time by different people. To prevent this, all transactions and subsequent ownership of a unit must be validated through a central third party. This incurs unnecessary fees and exposes our private data and financial history to someone else, like a bank. Blockchain tries to solve this problem.

The Blockchain file
A Blockchain is firstly a file on your computer that contains batches (or “blocks”) of transactions. Each block is linked to the previous one by a unique digital serial number computed from the contents of both blocks and a bit of cryptographic magic. This is the "chain".

Because the serial number is based on the previous block, if past transactions were changed, the serial numbers would no longer agree, signalling that tampering had occurred. Tracing the discrepancy is accomplished by checking all the serial numbers down the chain until the first mismatching block is found. This makes a Blockchain resistant to amendment.

Transactions are entered and maintained through a Blockchain management program, also installed on your computer.

The Blockchain network
A Blockchain file becomes useful for transacting when it is shared with other parties over a network. A Blockchain network is like a social network, but instead of exchanging personal news and photos, its users exchange a digital asset, like cryptocurrency.

To avoid needing a centralised database, everyone on the network gets a synchronised copy of the Blockchain file. So their file holds their transactions and everyone else's! But transactions are individually encrypted, exposing only their values to other users.

Validation
Each block submitted to the Blockchain is validated by any computer on the network with the most available computing power at the time. This ensures that transacting parties have proper credentials and sufficient currency to spend and that no single computer can take control of the validation process. Each computer then updates its file with the successfully validated block.

That's a very basic description of Blockchain and is intentionally flawed for simplicity's sake.

The benefit of Blockchain
Because the network shares transactions in a self-validated and secure manner, there's no need for a middleman. Although each validator earns a nominal fee, the cost is lower than banking fees. Also, ownership of a specific unit of currency is inherently tracked by the system so there’s no danger of double spending.

Although Facebook will use Blockchain, its mechanics may differ from those described above. More significantly, Libra could be the first large-scale cryptocurrency that offers a viable alternative payment platform to rival incumbents like MasterCard and Visa.

SAIPA’s role
Professional Accountants should have at least a basic understanding of how Blockchain and other new technologies work. As their role of trusted business advisor becomes the focus of their services and more of their clients embrace 4IR, they will encounter scenarios where these technologies are being implemented, should be implemented or should be avoided. Knowing how to approach each is important to winning a client’s confidence and adding real value to their operations.

SAIPA and its parent body, IFAC, continue to prepare our Professional Accountants for this and other innovations changing the face of the Profession. We're already developing advanced standards to ensure the public interest continues to be protected even when dealing with sometimes impenetrable technologies.
​
The theme of our Accounting iNdaba 2019 is “The Future-Ready Professional Accountant in the 4th Industrial Revolution”. The event will set the tone for our coming initiatives to equip the industry for change. Accountants from all professional bodies are welcome and can book their place at the iNdaba at www.saipa.co.za/accounting-indaba-2019.  

ENDS
 
MEDIA CONTACT: Stephné du Toit, 084 587 9933, stephne@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African Institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants