FAF, FASB, GASB: How We're Funded
Funding the FAF, the FASB, and the GASB
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 municipal bond brokers and dealers (for the GASB).
SUBSCRIPTION AND PUBLICATION REVENUE
In 2016, revenue from subscription and publication fees totaled $17.1 million.
Subscription and Publication 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. Both the FASB Codification and GASB materials also are available through various paid subscription plans and hard copy printed versions. In 2015, gross revenue from subscription and publication fees totaled $17.5 million.
|Year||Gross revenue from subscription and publication fees|
Accounting Support Fees
Accounting support fees are collected from certain groups of capital market participants:
In 2016, 8,444 publicly-traded companies paid a total of $24.8 million in annual support fees—an average of $8 a day.
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 2016, 437 broker dealers paid $8.3 million in annual support fees—an average of $56 per day.
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 four years, contributions from the Reserve Fund have offset a total of $73 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.
Sarbanes-Oxley provides that the FAF may collect as accounting support fees the full amount of the FASB’s recoverable expenses, as described earlier. Similarly, Dodd-Frank provides that the FAF may collect as accounting support fees the full amount of GASB’s 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 FAF’s investment balances have consisted of a reserve fund and a separate short-term investment fund. The reserve fund, established early in the FAF’s history, is intended to provide sufficient reserves to operate the FAF, the FASB, and the GASB during any temporary or permanent funding transition or to provide for any other unforeseen circumstances.
Beginning in 2007, the FAF established the targeted year-end reserve fund balance equal to one year of budgeted expenses for the entire organization, plus a working capital reserve equal to three months of net operating expenses for the entire organization. In addition, the FAF each year aims to have a balance in its short-term investment accounts on January 1 equal to three months of budgeted net operating expenses.
In 2014, the FAF Trustees approved a change to the FAF’s cash management policy to cap the targeted year-end reserve fund at one year of budgeted operating expenses. This eliminated the working capital reserves equal to one quarter of net operating expenses. The change was phased in over a three-year period (2014-2016).
The target short-term investment account will remain equal to one calendar quarter of net operating expenses. The change in policy reflects, among other things, improved working capital cash flow from the quarterly billing of GASB accounting support fees.
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 one year of budgeted operating expenses. 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 2013-2016
The FAF, the FASB, and the GASB 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.
Where to Find More Information about FAF, FASB, & GASB Funding
Detailed information about the FAF, the FASB, and the GASB funding sources, including the budget, audited financial statements and annual report, can be found here.