Memo Writing: Impacts and issues related to accepting a new alternative payment portal

Impacts and issues related to accepting a new alternative payment portal

TO: 

FROM: 

DATE: 

SUBJECT: Impacts and issues related to accepting a new alternative payment portal 

The purpose of this memo is to examine the issues related to accepting a new alternative payment portal that allows the client to accept cryptocurrency as means of payment and its impacts on financial statement 

Summary 

Updating the means of payment to cryptocurrency as a preferred alternative method of payment for clients is expected to significantly affect Securitor Inc. (SI) and its clients. The use of cryptocurrency by the company as requested by clients will have a significant impact on the financial statement of clients and other related issues that need to be considered before implementing this change.  As such, there is a need to examine the issues relating to change in accepting this new form of payment. 

Discussion of the issues to identify and the impact of accepting the alternative form of payment 

The alternative method of payment being cryptocurrency as suggested by clients raises several issues that need to be considered by the firm and the clients. Firstly, the new form of payment (cryptocurrency) does not constitute legal tender as it is not recognized as a medium of exchange. Although many businesses are accepting digital money as a payment method, it has not been universally accepted as a legal tender of payment (ACCA, 2021). This needs to be considered as it would be a risk for any business enterprise that has accepted cryptocurrency as a method of payment since most tax laws would not accept digital money as either revenue or asset during tax return evaluation. This, therefore, implies that it would be challenging for SI and its clients to strictly follow the legal tax laws.

Secondly, SI and its clients need to consider the constant fluctuation in the value of the new form of payment (cryptocurrency) making its valuation challenging. Both the firm and clients would be unable to maintain their confidence in these means of payment since it has no stabilizing force that will ensure their value does not fluctuate. The company will thus be forced to look keenly into each transaction to ascertain the most appropriate amount of cryptocurrency for a fair exchange. Given its limited acceptability and lack of alternatives, digital money seems to be more volatile than actual currencies, spurred by speculative demand and hoarding. (Thackeray, 2018). It will thus greatly affect SI’s and clients’ balance sheets since it would be complex to determine the valuation of the new currency. 

Lastly, SI and its clients need to consider that using cryptocurrency as an alternative payment method raises accounting issues which directly affect financial statements. Cryptocurrencies are not explicitly mentioned in existing ASPE standards. As a result, questions about whether cryptocurrencies are assets and if they are, what kind of assets are they in terms of ASPE standards are raised. Over 2,000 cryptocurrencies have been identified, and more are being developed (CPA Canada, 2022). The characteristics of different cryptocurrencies may differ, and the reasons for acquiring them may differ as well, resulting in different accounting issues. Due to this, an accounting policy applied to one cryptocurrency may not apply to another. 

Recommendation 

There are several advantages that result from the use of this new alternative payment portal as a means of payment by an organization. These advantages include low transaction fees for international payment, irreversible transactions, and easily accessible, secure, and fast processing as compared to fiat currencies. The firm should therefore consider the issues raised above in implementing this change in payment to obtain these benefits.                                     

References

ACCA. (2021). Accounting for cryptocurrencies. ACCA Global. https://www.accaglobal.com/in/en/student/exam-support-resources/professional-exams-study-resources/strategic-business-reporting/technical- articles/cryptocurrencies.html 

Thackeray, J. (2018, July 17). 5 inherent risks of cryptocurrency. FEI Daily -FEI. https://daily.financialexecutives.org/FEI-Daily/July-2018/5-Inherent-Risks-of- Cryptocurrency.aspx 

Introduction to accounting for cryptocurrencies under accounting standards for private enterprises (ASPE). CPA Canada. (2022, June 2). Retrieved June 17, 2022, from https://www.cpacanada.ca/en/business-and-accounting-resources/financial-and-non-financial-reporting/accounting-standards-for-private-enterprises-aspe/publications/accounting-for-cryptocurrencies-under-aspe