Core Summary

  • Daniel Tinkelman, an accounting professor at Brooklyn College of the City University of New York, wrote to the Financial Accounting Standards Board (FASB) on August 15 requesting revisions to the rules for handling personal financial statements under Generally Accepted Accounting Principles (GAAP).
  • The letter cites "ambiguities and disagreements" in the interpretation of existing rules exposed during former President Donald Trump's civil fraud trial as the reason for the request.
  • Tinkelman wrote: "Former President Trump testified at trial that he considered his personal financial statements 'worthless' due to the flexibility of GAAP," and expert witnesses also stated that GAAP allows valuations to differ by orders of magnitude. "I respectfully suggest that the FASB consider whether the accounting in this area requires revision and clarification."

In-Depth Analysis

Tinkelman's request came about six months after New York Judge Arthur Engoron ruled, following a lengthy trial, that the Trump Organization, Trump, and other defendants used fraudulent financial statements to inflate asset values, borrow more money at lower interest rates, and collectively imposed fines exceeding $300 million (with interest continuing to accrue), as previously reported by CFO Dive.

Last month, Trump appealed the fraud verdict, accusing New York Attorney General Letitia James of "power grabbing" and claiming that the loans obtained were fully repaid and no party raised objections, as reported by NBC News.

The FASB is considering Tinkelman's request. In an email statement to CFO Dive, FASB spokesperson Christine Klimek said: "Like all agenda requests, we will consider it as part of our process."

In the letter, Tinkelman noted that Section 274 of the Codification (Personal Financial Statements) requires financial statements to be presented at estimated current value, but provides no guidance outside that section on how to determine such value.

He suggested four modifications to the accounting rules for the personal financial section, including: 1) prohibiting the use of the term "net worth" unless the reported figure meets the definition (i.e., after deducting estimated taxes payable upon asset sales and liability settlements); 2) using "fair value" instead of "estimated current value"; 3) clarifying the accounting methods related to the requirement to present assets and liabilities at estimated current value; and 4) requiring disclosure of changes in accounting methods.

In an email response to CFO Dive, Tinkelman said he hopes the FASB will adopt the definition of "fair value" it uses in other areas of personal financial statements.

"I think it is a disgrace to the profession when the standards are so unclear that experts can argue over whether the value for financial purposes should be based on the current realizable price of property or on the possible sale price under very optimistic assumptions," Tinkelman wrote in the email.