Dive Brief:

• The Financial Accounting Standards Board is unlikely to consider tightening accounting rules covering how personal financial statements are treated under generally accepted accounting principles in the wake of President-elect Donald Trump’s election win, according to Jack Castonguay, an associate professor of accounting at Hofstra University in New York.    
• In August, Daniel Tinkelman, a professor of accounting at Brooklyn College of the City University of New York, wrote a letter to the FASB requesting that it put accounting guidance in Section 274 (Personal Financial Statements) on its agenda for reconsideration, noting that ambiguities and disagreements over interpretation of the standard were key issues in the civil fraud case bought by New York Attorney General Letitia James against Trump, the Trump Organization and former executives including CFO Allen Weisselberg. 
• “I don’t think the FASB had a big appetite for it before [the election] but…I would predict it’s essentially a nonstarter now,” Castonguay said in an interview, noting that it appears that other regulators and agencies such as the Securities and Exchange Commission appear poised to pull back on their regulatory initiatives in the incoming Trump administration. 

Dive Insight:

The agenda request will be “considered as part of our process,” a FASB spokesperson said, declining further comment.

Tinkelman said on Wednesday that he had not yet heard back from the FASB on the agenda item, though he did hear back on a separate request he made on Sept. 10 for the board to reconsider the Last-In, First-Out or LIFO inventory method for financial statement reporting.

“Before the election, the FASB might have found this a sensitive topic. With Trump’s election, it becomes even more sensitive,” Finkelman said in an email. 

Currently ASC 274 defines estimated current value as “for an asset, the amount at which the item could be exchanged between a buyer and seller, each of whom is well informed and willing, and neither of whom is compelled to buy or sell,” according to the letter.

But Tinkelman said that FASB should clarify what it wants assets to be valued at in personal financial statements. He suggested four changes to Section 274, including replacing the term “estimated current value” with “fair value,” forbidding the term “net worth” unless the reported figure involves subtracting estimated taxes due on the assets sale and payment of liabilities, requiring report preparers to disclose changes in accounting methods and clarifying the implementation guidance in ASC 274 so that methods of computing value do not “supercede the overall ASC 274 requriement that assets and liabilities be reported at estimated current value,” or alternatively fair value.   

Both Tinkelman and Castonguay noted that personal financial statements have never been a priority for the U.S. accounting standard setter. As such, even before the election ,the odds of the FASB picking up the project were low. You can prepare personal financial statements using different frameworks such as a cash basis or a tax basis, Castonguay said. “The problem is when you jump back and forth,” he said, such as in Trump’s recent civil fraud case whereby the company was showing different numbers for tax purposes than the ones they were showing to bankers when trying to get a loan. 

In February, New York Judge Arthur Engoron — after a lengthy bench trial — found the Trump Organization, Trump and other named defendants used fraudulent financial statements, which inflated certain key assets’ worth in order to borrow more at lower rates. He collectively ordered them to pay over $300 million in penalties, which is accruing interest, CFO Dive previously reported. Trump’s lawyers have appealed the case. but a lawyer for James said the AG plans to continue defending her judgment during his appeal, asserting that presidents don’t have immunity from civil litigation, ABC News reported Tuesday.