Much is being said and written about blockchain technology recently. Although initially used to manage cryptocurrencies, according to some people, blockchain could potentially revolutionize how things are done and change many industries that have been supported and driven by countless IT solutions in recent decades.

From supply chain management to secure data storage solutions, not to mention the management of digital medical files… our imagination seems to be the only limitation to the possible applications for this technology, which seems to be turning into a “digital panacea”.

To help you navigate in these very turbulent waters without feeling overwhelmed, we’ll be publishing a series of three articles on the subject. The underlying concepts for blockchain technology are explained in sufficiently general terms in this first article, so that you can understand how blockchain can be used to prevent cryptocurrency fraud, the subject of the second article. The third article will explain how blockchain can generally be used in areas where it does not seem natural to resort to this technology.

Blockchain in a nutshell

Heralded as the next revolution, coming in the wake of the changes brought about by the arrival of the Internet, blockchain technology provides an environment where transactions can be carried out securely between strangers, with no need for an intermediary.

How does it work?

To do this, blockchain technology leaves an indelible and unalterable trace of all transactions in a ledger. This ledger is, in fact, a system composed of blocks comprising all previous transactions and connected to a constantly growing chain (hence the name blockchain).

Before each transaction is executed, the system validates that the party actually owns the related assets, as claimed. The system will scan the entire chain to ensure transaction integrity. Once the transaction has been validated, a new block containing an indeterminate number of transactions is created and added to the chain. The system is totally decentralized and composed of a series of computers that are part of a network. So far, so good? Let’s continue.

The hardest thing to understand is how fraud can be prevented and how it can be ensured that the information in the ledger is absolutely true. Since the system is decentralized, each node (i.e. each computer connected to the network) must include a copy of the ledger that has to be updated as transactions are executed. But how can a malicious individual be prevented from taking advantage of the system by introducing false transactions? This is where a very important factor comes in: Blockchain uses the same mathematical theories and concepts as seen in cryptography, i.e. the ones that are used to ensure the security of your banking transactions and online purchases.

In order for a transaction to take place, there must be trust between the parties (who do not know one another). This is achieved through the exchange of public cipher keys and the use of private deciphering keys to confirm the participants’ identity. These concepts are largely beyond the scope of this article and do not need to be discussed to provide a good understanding of blockchain technology. However, you should know that the Bitcoin system uses a 256-bit key. In other words, cracking this key would mean finding a random number of 2 to the power of 256, which is mathematically impossible. To learn more about this, read this article online (in French only).

Blocks are authenticated before being added to the chain, and therefore are linked to one another via hash codes, i.e. encrypted information that is already stored in the existing blocks. This means that the network would quickly detect and reject any attempt to modify even the tiniest bit of information already in the chain.

What are the impacts?

With blockchain technology, it’s possible for strangers to carry out secure transactions without the need for a central authority to manage them. This is precisely how blockchain technology is currently upending a wide array of transaction models traditionally based on the concept of confidence in established bodies which, over time, have built their reputations to earn people’s trust.

However, recent history has shown that, this trust has been eroded, particularly during the financial crisis, with the major problems experienced by several central banks that were supposed to guarantee and safeguard asset value in their monetary systems. What makes blockchain interesting is that it is now possible to imagine specific property and broader data management systems with no need for controls by central third parties.

Traceability

Yet another important feature of blockchain technology is worth highlighting as well: transaction traceability. Blockchain ledgers always include all transactions that were accepted by network participants. It is highly unlikely that one person will be able to change the recorded data. Blockchain technology therefore makes it possible to develop monitoring tools that can reliably trace any transaction executed in the system. This will be discussed further in a future article, together with some practical examples.

For more information, note that Raymond Chabot Grant Thornton announced the creation of a Montréal-based blockchain centre of expertise in July 2017. The centre’s objective is to provide companies with the expertise they need to make the transition to this new digital platform.

26 Sep 2017  |  Written by :

Manager, Tax, Raymond Chabot Grant Thornton

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To watch the webinar (in French), click here.

You can also download the document (in French).

Businesses often put production cost on the back burner. Yet this is an essential decision-making and profitability management tool.

If any of the following comments sound familiar, you could find some answers in the webinar:

  • I have trouble setting a sale price for my services or products.
  • I can’t determine who my profitable customers are.
  • When I submit a bid, the results aren’t in line with estimated margins.
  • Sales are up, but profits are down.
  • I haven’t updated my production cost in years.

Calculating production cost can answer many questions that are often a source of stress for managers.

Our management consulting experts specializing in production cost and profitability analysis will outline the benefits of applying best practices in this area and the pitfalls to avoid.

You can also view a video about a client who implemented production cost (in French).

This free information session is a Raymond Chabot Grant Thornton presentation.

OUR SPEAKERS

Christiane Caisse, Senior Manager, Finance and Production Cost

Ghyslain Cadieux, Senior Manager, Finance and Production Cost

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Welcome to IFRS Newsletter – a newsletter that offers a summary of certain developments in International Financial Reporting Standards (IFRS) along with insights into topical issues.

We begin this third edition of the year by looking at the publication of IFRS 17 Insurance Contracts. After twenty years in the making, this new standard will have an impact on entities’ data, technology solutions and investor relations as well as their financial reporting.

We then move on to look at new proposals published by the International Accounting Standards Board (IASB), including proposed amendments to IAS 16 Property, Plant and Equipment. Further on in the newsletter, you will find IFRS related news at Grant Thornton and a general round-up of financial reporting developments. We finish with a summary of the implementation dates of newer standards that are not yet mandatory, and a list of IASB publications that are out for comment.

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You often hear, tell me how much you earn and I’ll tell you what tax bracket you’re in.

Talk about social status triggers considerable reaction, particularly in the context of taxes and public finances. Information about social classes and their contribution to public funding abounds. The general perception is that it’s better to have the so-called “rich” pay more taxes to fill government coffers and cover public spending than to ask more of the middle class.

Since the middle class often feels it’s the big loser, governments tend to present themselves as its strongest defender, something current Prime Minister Trudeau focusses on in his political discourse defending the interest of the middle class. But what exactly is the middle class?

The authors of a recent study by the Chaire en fiscalité et en finances publiques at the Université de Sherbrooke, under the leadership of Professor Luc Godbout, sought to determine whether the perception of the middle class was accurate. It comes as no surprise, the study revealed that there is a significant gap between the subjective perception of the middle class and the objective reality based on reported annual income and household structures (single person, couple, with or without children).

The middle class

A single individual without children with income between $28,500 and $57,00 is in the middle class. A couple without children is considered to be in the middle class if their income is between $40,500 and $80,500 and, for a couple with two children, the middle class range is between $57,000 and $114,000.

Perceptions

The study reveals that while 56% of individuals believe they are in the middle class, in reality, only 38% of them actually are. More surprising, only 6% of individuals feel they are rich but the percentage is actually 27%. In other words, only one higher income individual in five knows that he or she earns more than the middle class. This perception of the middle class is a bonus for government. Any policy announcement targeting the middle class is viewed positively by some 60% of the population, but the policy actually only applies to 40%.

Taxes paid

The study also revealed that people have an incorrect view of their tax contribution. Their perception is that the lower and middle classes, representing 73% of the population, pay 72% of taxes with 28% being paid by richer taxpayers. In reality, more prosperous individuals account for 27% of taxpayers and pay 70% of the taxes, with the lower and middle classes contributing 30%.

Taxpayer, beware of perceptions. The numbers speak for themselves!