BASIC OBJECTIVES AND GENERAL STANDARDS 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.

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

See Account Illustration