GAAP Flash –Too Big to Fail, blockchain technology, & more – 8.12.2016
gaap-flash-–too-big-to-fail,-blockchain-technology,-and-more-–-8.12.2016

GAAP Flash –Too Big to Fail, blockchain technology, & more – 8.12.2016

This week’s issue is dedicated to the financial sector. We’ll find that there might be dangers lurking behind too much bank regulation under Dodd Frank. You will also find an interesting take on the psychology of banks that are ‘too big to fail’. And lastly, we’ll explore how blockchain, the technology behind bitcoin, is changing the financial sector and why accountants should care!

Warning From Tokyo: Don’t Let Bank Regulators Create Another Japan (August 1, 2016) – The Wall Street Journal (@WSJ)

Japan’s top bank regulator reflects on lessons learned from his country’s economic crisis back in the 1990’s. In this article, he warns of too much regulation and not enough focus on economic growth and its impact on Japan’s recovery.

How It’s Relevant: Following the economic crisis, lawmakers in the U.S. passed the Dodd-Frank Act, resulting in the mandate for national regulators to issue a series of regulations, many aimed at the financial services industry. Many of these regulations restrict the way financial institutions can operate, such as raising capital requirements. As these new regulations are implemented, there is disagreement among experts as to the impact they will have on the economy, both within and outside of the financial services sector.

Bailouts of Too Big to Fail Banks Don’t Create Moral Hazard (August 1, 2016) – The Wall Street Journal (@WSJ)

This article highlights a recent study on “Too Big to Fail” Banks and whether or not a policy to bail them out, should they fail, results in their likelihood to take on greater risk, as compared to smaller banks. The results of the study and conclusion in the article may surprise you.

How it’s Relevant: Dodd-Frank, and its resulting regulations, created the concept of Systematically Important Financial Institutions, or SIFI’s. Under recent regulations, SIFI’s are subject to more strict regulations as compared to smaller financial institutions. Regulatory compliance is becoming more and more challenging to comply with for many financial institutions, and this article questions whether the approaches being taken will achieve the intended outcomes.

How the Tech Behind Bitcoin Could Revolutionize Wall Street (August 4, 2016) – Time (@TIME)

“From its mysterious origin story to its ties to black market dealings, Bitcoin has been closely watched since its emergence in 2009.” There are many that are still getting their arms around exactly how it works. Others are starting to see opportunities to use its underlying technology, blockchain, to conduct business more efficiently and securely. This article, through and interview with a blockchain expert, explores how the technology can be used in more conventional business transactions.

How It’s Relevant: We all know that technology is ever-changing and businesses must embrace technology to keep up and stay ahead of their competition. With recent data breaches and hacking scandals, even more focus has been placed on data security for financial institutions and other companies alike. From a financial reporting perspective, these controls impact the financial reporting of an entity and are subject to audit and regulatory oversight.

‘Big 4’ Accounting Firms Meet to Consider Blockchain Consortium (August 11, 2016) – CoinDesk (@coindesk)

Blockchain technology experts from the Big 4 accounting firms, as well as others, are meeting with the American Institute of Certified Public Accountants (AICPA) in New York to discuss establishing a distributed ledger consortium. The discussion will center around how the accounting industry could work together to develop new blockchain standards and identify exactly how a blockchain can help companies do their jobs more efficiently.

How It’s Relevant: Although this technology was once considered a threat to many aspects of the financial services sector, blockchain is now being embraced by many in the industry for its potential to streamline many repetitive transactions and possibly generate new avenues of revenue. Some accountants believe it is important to educate themselves of this new technology and ideas (such as “triple entry accounting”) to be ready when it potentially changes the way accounting works!

accounting and auditing update

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