FAE topic area 3.3: Blockchain and Cryptocurrency

Jan 13, 2020
Slowly building your knowledge in this new topic area will lead to irrefutable, immutable results in your career, says John Munnelly.

Now that the not too-small matter of A.A.F.R.P. (Advanced Application of Financial Reporting Principles) is out of the way, it is time for candidates to turn their attention to the pillars of core. Topic area 3 is an exciting new pillar of core, dedicated to new technologies that intersect with accountancy. A handy mnemonic used to describe topic area 3 was coined by Chartered Accountants Ireland Chief Executive Barry Dempsey:

A – Artificial intelligence (Topic 3.2)
B – Blockchain (Topic 3.3)
C – Cryptocurrency (Topic 3.3)
D – Data (incorporating preparation and visualisation) (Topic 3.1)

Topics 3.1 Data preparation and visualisation and 3.2 Artificial intelligence are delivered in an exciting interactive mix of classroom learning and guided application of tools through the granting of student licences. Candidates should make every effort to attend whatever sessions are provided.  

Topic area 3.3 Blockchain and Cryptocurrency is being delivered as a self-guided module. This does not mean that it is no less relevant than the other two topic areas. Blockchain and cryptocurrency represent a potentially new way of thinking about financial systems and where financial systems will migrate over to candidates’ careers. While cryptocurrency only represents approximately 0.1% of the total global money markets, it, like blockchain, represents some interesting and dramatic ideas that punch way above their market capitalisations. 

Teaching approach

The syllabus materials have been written to address the big themes and deliberately separates blockchain from cryptocurrency. This is not always the case if you conducted an internet search on this topic, however it is the correct approach to teach the principles. 

Candidates should approach this topic area with an open mind. The ideals behind blockchain and cryptocurrency can firmly be connected to accountancy, and the accountant will have an important future function in understanding and protecting companies and clients’ interface with such applications and transactions.  

Tackling cryptocurrencies and blockchain

Candidates should do an initial read through of the syllabus materials provided. The narrative is written in a story format so as not to get too technical or ‘scare’ candidates off.

Once candidates have done read the syllabus, they should watch the accompanying videos. There is one dedicated to each highlighted part of each chapter of the text. Some videos are longer than others. Hopefully on the second watch (and we do recommend rewatching them), some of the initial ideas will start to make more sense. 

After viewing the videos, I would advise candidates to make their own notes. The concept of centralised and decentralised trust is a big theme running through the blockchain material, and candidates should appreciate the nuances. Blockchain represents a different opportunity, and industries from banking to logistics are cottoning on to that fact. There is also the classic database versus blockchain comparison which should be intuitive for candidates and, I imagine, highly favoured by examiners as it lends itself to classic compare and contrast differences in an indicator. 

Candidates should also be comfortable with blockchain’s current limitations when in assessing a potential scenario to move to a blockchain environment. 

Lastly, there are practical considerations that are often overlooked in real world use cases on blockchain. The useful guide of the different skills required to undertake a blockchain project should not be underestimated. 

Learning cryptocurrency

The chapter on cryptocurrency focuses predominantly on Bitcoin. Ethereum gets a mention because of the work done on that platform in regards to smart contracts, however, after sitting atop of the first blockchain, Bitcoin has proven to be reliable and tamper resistant over its decade-long life. 

Chapter two is designed to give candidates an understanding of the principles behind Bitcoin, how it derives its value, how it operates and how it is unique. The Crypto Assessment Framework has been designed primarily with accountants in mind for the situations whereby they come into contact with cryptocurrency transactions. This year’s handbook, Problem Solving and the FAE, contains a sample cryptocurrency indicator and can be solved by using the principles of the Crypto Assessment Framework. 

There are a lot of new ideas in topic 3.3. A patient approach will help you build a thorough understanding and an ability to apply those lessons to exam scenarios.