FASB, GASB, FAF: HOW WE'RE FUNDED
FUNDING THE FASB, THE GASB, AND THE FAF
Independent, reliable funding safeguards the ability of the FASB and the GASB to set standards in an environment free from real or perceived conflicts of interest. The current funding mechanisms for our standard-setters means they don’t have to try to raise money from the very organizations that are subject to accounting standards. What follows is a high-level overview of how the FASB, GASB, FAF are funded.
The work of the Financial Accounting Foundation (FAF), the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB) is funded by a combination of publishing revenue, accounting support fees, and investment income.
The largest share of financial support for the standard-setting boards comes from accounting support fees. Those fees are paid by publicly traded companies (for the FASB) and certain municipal bond brokers and dealers (for the GASB).
In 2022, publishing revenue totaled $21.2 million.
Publishing revenue includes sales and licensing of copyrighted FASB- and GASB-related materials. The FAF licenses the content of the FASB Codification and GASB publications to commercial publishers and other licensees for inclusion in their proprietary online research systems. In 2021, gross revenue from publishing fees totaled $19.0 million.
ACCOUNTING SUPPORT FEES
Accounting support fees are collected from certain groups of capital market participants:
In 2022, 9,814 publicly-traded companies paid a total of $41.1 million in annual support fees.
FASB Accounting Support Fees are collected under Section 109 of the Sarbanes-Oxley Act of 2002 to fund the annual recoverable expenses of the FASB. Recoverable expenses are the total FASB operating expenses adjusted to 1) exclude non-cash expenses (mainly depreciation) and 2) include other cash requirements (mainly capital expenditures). Put another way, recoverable expenses are roughly equivalent to operating expenses. FASB accounting support fees are assessed on and collected from issuers of publicly-traded securities, as those issuers are defined in the Sarbanes-Oxley Act, and are allocated based on the average market capitalization of each issuer. The FASB accounting support fees are reviewed by the U.S. Securities and Exchange Commission (SEC) each year to ensure compliance with the statute.
|Number of publicly-traded companies||Amount paid|
In 2022, 348 broker dealers paid $12.5 million in annual support fees.
GASB Accounting Support Fees are collected under Section 978 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to fund the annual recoverable expenses (again, roughly equivalent to operating expenses) of the GASB. These support fees were instituted in 2012 through an SEC order instructing the Financial Industry Regulatory Authority (FINRA) to establish, assess, and collect accounting support fees from its members.
|Year||Number of broker dealers||Amount paid|
HOW DO WE DETERMINE THE ANNUAL SUPPORT FEE?
Over the past five years, contributions from the Reserve Fund have offset a total of $69.4 million that otherwise would have been collected through accounting support fees.
The laws that enacted the accounting support fees permit the FAF to recoup the Boards’ full annual budgeted recoverable expenses. Historically, the FAF has voluntarily funded a portion of the Boards’ recoverable expenses with available Reserve Funds.
First, the FAF creates its budget. The FAF then determines its voluntary calculated amount available from its Reserve Funds to offset a portion of its recoverable expenses, and only recoups accounting support fees on the balance of recoverable expenses.
The FAF voluntarily has chosen not to seek accounting support fees to fund the full amount of the FASB and GASB budget.
Instead, the FAF has chosen to fund a portion of FASB and GASB recoverable expenses with reserve funds that are forecast to exceed a targeted reserve balance.
TARGET RESERVE FUND
The reserve fund, established early in the FAF’s history, is intended to provide sufficient reserves to operate the FASB, the GASB, and the FAF during any temporary or permanent funding transition or to provide for any other unforeseen circumstances.
Beginning in 2023, the targeted year-end reserve fund balance will equal a minimum of one year of budgeted expenditures for the entire organization.
HOW DO WE DETERMINE THE VOLUNTARY RESERVE FUND CONTRIBUTION?(AND HOW DO THEY AFFECT VOLATILITY IN FASB/GASB ACCOUNTING SUPPORT FEES)
As noted above, the FAF’s policy is to maintain a Reserve Fund that is equal to a mnimum of one year of budgeted expenditures. At its discretion, the FAF may establish additional long-term reserve to provide flexibility for unusual or strategic capital outlays or other business purposes. Reserve Funds are principally funded by revenue from the FAF sales and licensing of copyrighted FASB- and GASB-related materials and income earned from FAF investments.
KEY FINANCIAL METRICS 2018-2022
The FASB, the GASB, and the FAF strive to be fiscally responsible stewards of accounting support fees and other resources provided in service to the objectives of developing the highest-quality standards possible. The numbers below reflect the relocation of FAF's headquarters in 2022 and the cost for related construction, including funding from reserve fund contribution.
WHERE TO FIND MORE INFORMATION ABOUT FASB, GASB, & FAF FUNDING
Detailed information about the FASB, the GASB, and the FAF funding sources, including the budget, audited financial statements and annual report, can be found here.