Space Accounting Matters

JUNE 16, 2016

BY ZACH DE GREGORIO

Whenever I meet a new accountant, I always ask them, “Does your firm have a department specializing in Space Accounting?” It is surprising to me when they respond with expressions of confusion and bewilderment.With the recent growth of the commercial space industry, too many accounting firms are still operating under “business as usual,” at a time when it is crucial that accountants take a leadership role in space exploration.

Space travel is the emerging industry that will dominate the next decade. Companies are already working towards flying tourists into space and running hotels in space. Soon companies will be manufacturing in space. Affordable nanosatellites will put even more technology into high orbits. And there are already business plans for mining operations on the Moon and Mars. All these possibilities have one thing in common: accounting.

As soon as the human race begins to regularly travel, live and work in space, a series of accounting problems surfaces where we have no solution. What tax jurisdiction do space activities fall under? What accounting standards do we use in space? Which accountant are we going to send to audit the mining operation on the moon?

Perhaps the immediate accounting problem is how to raise capital for these feats of exploration. Luckily, there is a historical precedent of an appropriate business model, the founding of the colony of Jamestown in 1607. What many people forget is that Jamestown was a business. Jamestown started with investors forming a joint stock company called the Virginia Company of London. All of the financial backings came from stockholders in the company. Jamestown has striking similarities to setting up a remote colony on the moon and faces many of the same accounting problems. Effective use of capital markets requires accountants to validate financial reporting for investors. It is true that Jamestown had its share of problems; many of the original settlers died and some even resorted to cannibalism. However, Jamestown did eventually become a resounding success and laid the foundation for what would eventually become the United States of America.

Just as in the formation of the Virginia Company of London, accountants are the key to unlocking the next space age. The stakes are high, and time is running short. It will take a time to develop Internationally Accepted Accounting Standards for Space. It will take a time to solve the accounting problems of space travel. And it will take the time to train the next group of auditors to be astronauts. I encourage my fellow CPAs to get involved in the commercialization of space and start a space department at your firm. We should be working together now to develop solutions to these problems and enable the exploration of a new frontier.

Zach De Gregorio, CPA, is CFO of Spaceport America and author of On Wolves and Finance.

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