NATIONAL FIDUCIARY ACCOUNTING STANDARDS PROJECT 
 
1983 REPORT OF FIDUCIARY ACCOUNTING STANDARDS COMMITTEE 

cope of the Project 

“Fiduciary  Accounting”  does  not  have  one  commonly  understood  meaning.  In  a  broad 
sense,  it  can  mean  the  entire  process  whereby  a  fiduciary  –  normally  a  personal 
representative,  trustee  or  guardian  –  communicates  information  on  an  on-going  basis 
regarding his administration of a fund and periodically justifies his administration to the parties 
in  interest  and,  perhaps,  to  a  court.  In  another  sense,  it  may  be  the  process  whereby  a 
fiduciary – here more often a trustee – periodically keeps parties in interest currently informed 
of transactions and investment policies being followed. 

In a narrower sense, to which this report is directed, a fiduciary accounting may refer to 
the statement prepared by a fiduciary at the close of his administration of a fund (or at some 
appropriate intermediate stage) to reflect transactions that have occurred and to be presented 
to  the  parties  in  interest  as  part  of  a  process  whereby  the  fiduciary  seeks  discharge  from 
liability for the events disclosed. 

There  is  undoubtedly  much  that  can  be  accomplished  to  improve  the  general 
administration  of  estates  and  trusts.  A  broad  study  of  our  basic  fiduciary  accounting  models 
could  lead  to  dramatic  change  in  the  future.  But  such  a  study  as  well  as  general  questions 
regarding  what  constitutes  fair  and  adequate  procedures  in  a  large  variety  of  circumstances 
remain beyond the scope of this project. 

dvantages to Be Gained from Uniformity 

The  manner  in  which  a  fiduciary  records  receipts  and  disbursements  and  gains  and 
losses  from  investment  during  the  course  of  administration  is  commonly  dictated  by  local 
practice,  court  rule  or  statute.  In  many  jurisdictions  there  is  a  lack  of  clarity  or  consistency 
regarding  the  form  and  content  of  such  an  accounting.  A  uniform  form  of  account  and  the 
creation of guiding principles of accounting would be a most helpful development. 

Through  the  development  of  a  uniform  form  of  account  the  forms  that  are  now  in  use 
can be improved. It would not be expected that immediate change to a model account format 
would be required of corporate fiduciaries with substantial investments in computer programs 
but ultimately, standardization of forms will permit more effective utilization of machine record 
keeping  techniques  and  significant  cost  savings.  Standards  for  acceptable  accounting 
practices will provide needed guidelines. 

Since proposed standards can be illustrated by example, we have focused on form and 
content of a statement of transactions, recognizing that a proper form of account is important 
whether the account is to be presented in court or employed as part of an informal settlement 
process between a fiduciary and beneficiaries. 
 

  S

   

   

   

   

   

  A

   

Performance Accounting Distinguished 

No  effort  has  been  made  to  standardize  that  kind  of  fiduciary  accounting  which  is 
directed toward an analysis of the investment performance of a fund. Accounts of this type are 
often  distributed  to  beneficiaries  by  corporate  fiduciaries  at  regular  intervals,  generally  one 
year  or  less,  and  contain  statements  of  receipts,  disbursements  and  assets  on  hand  at  the 
close of the period. The statement of assets customarily discloses additional information such 
as cost or tax basis, current market value, current yield expressed sometimes both in dollars 
and as a percentage of cost or market, and may show the distribution of investments among 
various  categories  such  as  bonds  and  stocks  with  subdivision  of  stocks  by  industry.  These 
statements  can  be  immensely  valuable,  both  as  an  aid  to  the  fiduciary  in  analyzing  the 
structure of the portfolio, and for the information of beneficiaries. Indeed, because this form of 
report  reflects  and  analyzes  current  investment  policy,  it  may  be  described  as  more  positive 
and  forward  looking  than  an  unrationalized  account  of  past  transactions  which  is  commonly 
used  as  a  basis  for  discharge  from  responsibility  for  past  acts.  However,  accountings  of  this 
type  are  fundamentally  different  in  purpose  from  the  traditional  concept  of  discharge 
accounting  by  a  fiduciary.  There  are  inherent  limitations  that  tend  to  restrict  their  use  to 
professional institutionalized fiduciaries, and the need for establishment of standards appears 
to be less pressing than in the conventional area of discharge accounting. 

asic Objectives and General Standards of Fiduciary Accounting 

The  fundamental  objective  of  an  account  should  be  to  provide  essential  and  useful 
information in a meaningful form to the parties interested in the accounting process. It is also 
important  that  the  account  should  be  sufficiently  simple  to  enable  its  preparation  without 
unreasonable expense to the fund, or undue distraction from the on-going administration of the 
estate.  Finally,  although  the  parties  should  understand  the  nature  of  the  accounting  process 
and  the  need  to  protect  their  interests,  the  relationship  of  trust  and  confidence  existing 
between  the  fiduciary  and  the  beneficiaries  is  itself  important  and  the  account  should  not  be 
presented in an adversary format that will unnecessarily impair this relationship. 

ompeting Goals 

Maximum clarity, full disclosure and complete description and explanation of all events 
to  be  disclosed  appear  to  be  standards  that  all  would  accept.  But,  in  combination,  they  may 
present many difficulties. For example, clarity may be obscured by the detail that is required for 
a  disclosure  that  omits  nothing.  Full  explanation  of  all  investment  decisions  might  produce  a 
massive  document  that  few  beneficiaries  would  read.  On  balance,  a  set  of  flexible  principles 
keyed to the standard of good faith supports the utmost protection of the parties and permits 
accounting standards to change and mature as circumstances require. 

Fiduciary accounts rarely will be identical. In addition to the predictable variables of the 
size and composition of the assets, the period covered and the position of those interested, the 
significance  of  particular  issues  in  a  controversy  may  be  illuminated  by  special  accounting 
treatment  of  some  portion  of  a  fund.  This  suggests  that  a  fiduciary  should  have  enough 
flexibility to state an account in the manner best adapted to the particular circumstances and 

   

  B

   

  C

   

   

discourages  any  effort  to  prescribe  a  totally  rigid  format.  Accordingly,  the  following  principles 
are suggested as general standards for fiduciary accounting. 

Sample  Executor’s  and  Trustee’s  accounts  are  attached  to  illustrate  the  application  of 

the suggested standards for fiduciary accounting. 

odel Accounts 

iduciary Accounting Principles 

I. Accounts should be stated in a manner that is understandable by persons who 
are not familiar with practices and terminology peculiar to the administration of estates 
and trusts. 

ommentary: 

In order for an account to fulfill its basic function of communication, it is essential that it 
be stated in a manner that recognizes that the interested parties are not usually familiar with 
fiduciary  accounts.  It  is  neither  practical  nor  desirable  to  require  that  accounts  be  tailored  to 
meet  individual  disabilities  of  particular  parties  but  any  account  should  be  capable  of  being 
understood  by  a  person  of  average  intelligence,  literate  in  English,  and  familiar  with  basic 
financial terms who has read it with care and attention. 

Problems arising from terminology or style are usually a reflection of the fact that people 
who become versed in a particular form of practice tend to forget that terms which are familiar 
and  useful  to  them  may  convey  nothing  to  someone  else  or  may  even  be  affirmatively 
misleading.  For  example,  the  terms  “debit”  and  “credit”  are  generally  incomprehensible  to 
people  with  no  knowledge  of  bookkeeping  and  many  people  who  are  familiar  with  them  in 
other contexts would assume that in the context of fiduciary accounting, the receipt of an item 
is a “credit” to the fund rather than a “debit” to the fiduciary. 

While  the  need  for  concise  presentation  makes  a  certain  amount  of  abbreviation  both 
acceptable  and  necessary,  uncommon  abbreviation  of  matters  essential  to  an  understanding 
of the account should be avoided or explained. 

No position is taken for or against the use of direct print-outs from machine accounting 
systems. The quality of the accounts produced by these systems varies widely in the extent to 
which they can be understood by persons who are not familiar with them. To endorse or object 
to a direct print-out because it is produced by machine from previously stored data would miss 
the  essential  point  by  focusing  attention  upon  the  manner  of  preparation  rather  than  the 
product. 

  M

   

  F

   

  C

   

   

   

   

II.  A  fiduciary  account  shall  begin  with  a  concise  summary  of  its  purpose  and 

ommentary: 

  C

 
content. 

Very  few  people  can  be  expected  to  pay  much  attention  to  a  document  unless  they 
have some understanding of its general purpose and its significance to them.  Even with such 
an understanding, impressions derived from the first page or two will often determine whether 
the rest is read. The use that is made of these pages is therefore of particular significance. 

The  cover  page  should  disclose  the  nature  and  function  of  the  account.  While  a 
complete explanation of the significance of the account and the effect of its presentation upon 
the  rights  of  the  parties  is  obviously  impractical  for  inclusion  at  this  point,  there  should  be  at 
least a brief statement identifying the fiduciary and the subject matter, noting the importance of 
examining the account and giving an address where more information can be obtained.  

It is assumed that the parties would also have enough information from other sources to 
understand  the  nature  of  their  relationship  to  the  fund  (e.g.,  residuary  legatee,  life  tenant, 
remainderman), the function of the account, and the obligation of the fiduciary to supply further 
relevant information upon request. It is also assumed that notice will be given of any significant 
procedural  considerations  such  as  limitation  on  the  time  within  which  objections  must  be 
presented.  This  would  normally  be  provided  by  prior  or  contemporaneous  memoranda, 
correspondence or discussions. 

A  summary  of  the  account  shall  also  be  presented  at  the  outset.  This  summary, 
organized as a table of contents, shall indicate the order of the details presented in the account 
and shall show separate totals for the aggregate of the assets on hand at the beginning of the 
accounting period; transactions during the period; and the assets remaining on hand at the end 
of the period. Each entry in the summary shall be supported by a schedule in the account that 
provides the details on which the summary is based. 

III.  A  fiduciary  account  shall  contain  sufficient  information  to  put  the  interested 
parties  on  notice  as  to  all  significant  transactions  affecting  administration  during  the 
accounting period. 

ommentary:   

  C

The  presentation  of  the  information  in  an  account  shall  allow  an  interested  party  to 
follow  the  progress  of  the  fiduciary’s  administration  of  assets  during  the  accounting  period 
without  reference  to  an  inventory  or  earlier  accounting  that  is  not  included  in  the  current 
account. 

An account is not complete if it does not itemize assets on hand at the beginning of the 

accounting period. 

   

   

   

   

   

   

   

3.1 The first account for a decedent’s estate or a trust should detail the items received 
by the fiduciary and for which he is responsible. It should not simply refer to the total amount of 
an inventory filed elsewhere or assets described in a schedule attached to a deed of trust. 

3.2 In later accounts for an estate or trust, the opening balance should not simply refer 
to  the  total  value  of  principal  on  hand  as  shown  in  detail  in  the  prior  account,  but  should  list 
each item separately. 

Instead  of  retyping  the  complete  list  of  assets  in  the  opening  balance,  the  accountant 
may prefer to attach as an exhibit a copy of the inventory, closing balance from last account, 
etc., as appropriate. 

It  should  be  recognized 

Transactions  shall  be  described  in  sufficient  detail  to  give  interested  parties  notice  of 
their  purpose  and  effect. 
too  much  detail  may  be 
counterproductive to making the account understandable. In accounts covering long periods or 
dealing  with  extensive  assets,  it  is  usually  desirable  to  consolidate  information.  For  instance, 
where income from a number of securities is being accounted for over a long period of time, a 
statement  of  the  total  dividends  received  on  each  security  with  appropriate  indication  of 
changes in the number of shares held will be more readily understandable and easier to check 
for completeness than a chronological listing of all dividends received. 

that 

Although  detail  should  generally  be  avoided  for  routine  transactions,  it  will  often  be 

necessary to a proper understanding of an event that is somewhat out of the ordinary. 

Illustrations: 

3.3 Extraordinary appraisal costs should be shown separately and explained. 

3.4 Interest and penalties in connection with later filing of tax returns should be shown 

separately and explained. 

3.5 An extraordinary allocation between principal and income such as apportionment of 

proceeds of property acquired on forclosure should be separately stated and explained. 

3.6 Computation of a formula marital deduction gift involving non-probate assets should 

be explained. 
 

 

   

   

   

   

   

   

   

   

   

   

Illustrations: 

IV. A fiduciary account shall include both carrying values—representing the value 
 
of assets at acquisition by the fiduciary—and current values at the beginning and end of 
the accounting period. 

ommentary: 

In  order  for  transactions  to  be  reported  on  a  consistent  basis,  an  appropriate  carrying 

value for assets must be chosen and employed consistently. 

The carrying value of an asset should reflect its value at the time it is acquired by the 
fiduciary  (or  a  predecessor  fiduciary).  When  such  a  value  is  not  precisely  determinable,  the 
figure  used  should  reflect  a  thoughtful  decision  by  the  fiduciary.  For  assets  owned  by  a 
decedent, inventory values or estate tax values—generally reflective of date of death values—
would be appropriate. Assets received in kind by a trustee from a settlor of an inter-vivos trust 
should  be  carried  at  their  value  at  the  time  of  receipt.  For  assets  purchased  during  the 
administration of the fund, cost would normally be used. Use of Federal income tax bases for 
carrying value is acceptable when basis is reasonably representative of real values at the time 
of  acquisition.  Use  of  tax  basis  as  a  carrying  value  under  other  circumstances  could  be 
affirmatively misleading to beneficiaries and therefore is not appropriate. 

In the Model Account, carrying value is referred to as “fiduciary acquisition value.” The 
Model Account establishes the initial carrying value of assets as their value at date of death for 
inventoried assets, date of receipt for subsequent receipts and cost for investments. 

Carrying value would not normally be adjusted for depreciation. 

Except  for  adjustments  that  occur  normally  under  the  accounting  system  in  use, 
carrying  values  should  generally  be  continued  unchanged  through  successive  accounts  and 
assets should not be arbitrarily “written up” or “written down.” In some circumstances, however, 
with proper disclosure and explanation, carrying value may be adjusted. 

Illustrations: 

4.1 Carrying values based on date of death may be adjusted to reflect changes on audit 

of estate or inheritance tax returns. 

4.2 Where appropriate under applicable local law, a successor fiduciary may adjust the 

carrying value of assets to reflect values at the start of his administration. 

4.3 Assets received in kind in satisfaction of a pecuniary legacy should be carried at the 

value used for purposes of distribution. 

Though  essential 

for  accounting  purposes,  carrying  values  are  commonly 
misunderstood  by  laymen  as  being  a  representation  of  actual  values.  To  avoid  this,  the 
account should include both current values and carrying values. 
 

  C

   

   

   

   

   

   

   

   

   

   

The value of assets at the beginning and ending of each accounting period is necessary 
 
information of the evaluation of investment performance. Therefore, the account should show 
current values at the start of the period for all assets whose carrying values were established 
in a prior accounting period. 

Illustrations: 

4.4  The  opening  balance  of  the  first  account  of  a  testamentary  trustee  will  usually 
contain assets received in kind from the executor. Unless the carrying value was written up at 
the  time  of  distribution  (e.g.,  4.2  or  4.3  supra)  these  assets  will  be  carried  at  a  value 
established  during  the  executor’s  administration.  The  current  value  at  the  beginning  of  the 
accounting period should also be shown. 

4.5  An  executor’s  first  account  will  normally  carry  assets  at  inventory  (date  of  death) 
values or cost. No separate listing of current values at the beginning of the accounting period 
is necessary. 

Current  values  should  also  be  shown  for  all  assets  on  hand  at  the  close  of  the 
accounting period. The date on which current values are determined shall be stated and shall 
be the last day of the accounting period, or a date as close thereto as reasonably possible. 

Current values should be shown in a column parallel to the column of carrying values. 

Both columns should be totalled. 

In  determining  current  values  for  assets  for  which  there  is  no  readily  ascertainable 
current value, the source of the value stated in the account shall be explained. The fiduciary 
shall make a good faith effort to determine realistic values but should not be expected to incur 
expenses  for  appraisals  or  similar  costs  when  there  is  no  reason  to  expect  that  the  resulting 
information will be of practical consequence to the administration of the estate or the protection 
of the interests of the parties. 

Illustrations: 

4.6 When an asset is held under circumstances that make it clear that it will not be sold 
(e.g.,  a  residence  held  for  use  of  a  beneficiary)  the  fiduciary’s  estimate  of  value  would  be 
acceptable in lieu of an appraisal. 

4.7  Consideration  such  as  a  pending  tax  audit  or  offer  of  the  property  for  sale  may 
indicate  the  advisability  of  not  publishing  the  fiduciary’s  best  estimate  of  value.  In  such 
circumstances,  a  statement  that  value  was  fixed  by  some  method  such  as  “per  company 
books”, “formula under buy-sell agreement”, “300% of assessed value”  would  be  acceptable, 
but  the  fiduciary  would  be  expected  to  provide  further  information  to  interested  parties  upon 
request. 
 

   

   

   

   

   

   

   

   

   

V.  Gains  and  losses  incurred  during  the  accounting  period  shall  be  shown 

 
separately in the same schedule. 

ommentary: 

  C

Each  transaction  involving  the  sale  or  other  disposition  of  securities  during  the 
accounting period shall be shown as a separate item in one combined schedule of the account 
indicating the transaction, date, explanation, and any gain or loss. 

Although  gains  and  losses  from  the  sale  of  securities  can  be  shown  separately  in 
accounts,  the  preferred  method  of  presentation  is  to  present  this  information  in  a  single 
schedule.  Such  a  presentation  provides  the  most  meaningful  description  of  investment 
performance  and  will  tend  to  clarify  relationships  between  gains  and  losses  that  are 
deliberately realized at the same time. 

VI. The account shall show significant transactions that do not affect the amount 

for which the fiduciary is accountable. 

ommentary: 

  C

Transactions such as the purchase of an investment, receipt of a stock split or change 
of a corporate name do not alter the total fund for which a fiduciary is accountable but must be 
shown  in  order  to  permit  analysis  and  an  understanding  of  the  administration  of  the  fund. 
These can be best shown in information schedules. 

One  schedule  should  list  all  investments  made  during  the  accounting  period.  It  should 
include those subsequently sold as well as those still on hand. Frequently the same money will 
be used for a series of investments. Therefore, the schedule should not be totalled in order to 
avoid giving an exaggerated idea of the size of the fund. 

A  second  schedule  (entitled  “Changes  in  Investment  Holdings”  in  the  Model  Account) 
should  show  all  transactions  affecting  a  particular  security  holding  such  as  purchase  of 
additional  shares,  partial  sales,  stock  splits,  change  of  corporate  name,  divestment 
distributions,  etc.  This  schedule,  similar  to  a  ledger  account  for  each  holding,  will  reconcile 
opening and closing entries for particular holdings, explain changes in carrying value and avoid 
extensive searches through the account for information scattered among other schedules. 

ommittee Comment:  The Model Executor’s Account and Model Trustee’s Account published 
in  connection  with  the  above  Report  of  the  Fiduciary  Accounting  Standards  Committee  have 
been  replaced  by  the  Model  Estate  Account  and  Model  Trust  Account  which  appear  in  this 
Appendix.   
 

   

   

     

   

   

   

  C