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FAQ: The Issuer Accounting Support Fee and The Funding Process

May 7, 2014

These frequently asked questions set forth the staff's views on issues related to the implementation of the Public Company Accounting Oversight Board's ("PCAOB" or "Board") funding rules as they relate to issuers.[1] The statements contained in these frequently asked questions are not rules of the Board, nor have they been approved by the Board.

If you have a question related to the issuer accounting support fee and the funding process that is not addressed in these FAQs, please contact the staff by phone at 1-866-606-3982 (9:00 a.m. to 5:00 p.m. ET) or by email at BillingFAQ@pcaobus.org. In addition, the Board's funding rules are located at http://pcaobus.org/Rules/PCAOBRules/Pages/Section_7.aspx.

General FAQs

1.  How can I obtain a copy of the PCAOB's funding rules?

The full text of the PCAOB's rules is available under "Rules" at http://pcaobus.org/Rules/PCAOBRules/Pages/default.aspx. The funding rules are in Section 7 of the Rules.

2.  What issuers are subject to the PCAOB and Financial Accounting Standards Board ("FASB")[2] issuer accounting support fees?

All companies that are issuers, as that term is defined in Section 2(a)(7) of the Sarbanes-Oxley Act of 2002, as amended ("Act"), as of the date on which the allocation of the annual PCAOB and FASB issuer accounting support fees are set are subject to the issuer accounting support fees. Generally, Equity Issuers and Investment Company Issuers described below are assessed shares of the issuer accounting support fees greater than $0:

  • Equity Issuers: Publicly traded companies with average, monthly equity market capitalization during the preceding calendar year of greater than $75 million based on all classes of common equity.
  • Investment Company Issuers: Entities registered under Section 8 of the Investment Company Act of 1940 and issuers that have elected to be regulated as business development companies pursuant to Section 54 of the Investment Company Act of 1940 with average, monthly market capitalization or net asset value during the preceding calendar year of greater than $500 million.

The Board uses market capitalization and net asset value information from nationally-recognized market data sources.

3.  How are an issuer's shares of the PCAOB and FASB issuer accounting support fees calculated?

Per PCAOB Rule 7101(b), Equity Issuers and Investment Company Issuers are allocated shares of the PCAOB and FASB issuer accounting support fees based on their relative average, monthly market capitalization. An issuer's share is its average, monthly market capitalization during the preceding calendar year, divided by the sum of the average, monthly market capitalizations of all Equity Issuers and Investment Company Issuers during the preceding calendar year. For the purposes of this allocation, however, the average, monthly market capitalizations of an Investment Company Issuer will be 10 percent of the Investment Company Issuer's actual average, monthly market capitalization or net asset value.

4.  As of what date did the PCAOB calculate the allocation of the PCAOB and FASB issuer accounting support fees for 2014?

For 2014, the PCAOB calculated the issuer accounting support fee allocation as of March 31, 2014 ("the 2014 Calculation Date"). Under the Board's funding rules, companies that are issuers as of the 2014 Calculation Date are subject to the 2014 PCAOB and FASB issuer accounting support fees. The calculation date may vary in future years.

5.  If my company's market capitalization increased or decreased in the prior calendar year from the previous calendar year, should its shares of the PCAOB and FASB issuer accounting support fees correspondingly increase or decrease?

Not necessarily. An individual issuer's shares of the issuer accounting support fees are based on its average, monthly market capitalization during the preceding calendar year relative to the total average, monthly market capitalizations of all Equity Issuers and Investment Company Issuers. Therefore, if other Equity Issuers and Investment Company Issuers also experienced a change in their market capitalizations, resulting in a higher or lower total average, monthly market capitalization, an issuer's shares of the issuer accounting support fees may increase, decrease, or remain approximately the same. As a result, some issuers' shares of the accounting support fees may have decreased or increased even though their market capitalizations were substantially similar between calendar years.

6.  How can my company dispute its shares of the PCAOB and FASB issuer accounting support fees?

PCAOB Rule 7103(c) allows an issuer that disagrees with the class in which it was placed for billing purposes or with the calculation by which its shares of the fees were determined to petition the Board for a correction. Petitions must: (1) include an explanation of why the issuer believes the classification or calculation was erroneous, (2) be in writing, and (3) be received on or before the 60th day after the invoice is sent or within such longer period as the Board allows for good cause shown. The Board will notify the issuer of its decision on the petition in writing.

Payment FAQs

7.  When is my company's payment due?

PCAOB Rule 7104(a) states that "payment shall be due on the 30th day after the invoice is sent" unless the Board directs otherwise. You may treat the invoice date as the date on which the invoice was sent for purposes of the Board's funding rules. For 2014, the invoice date was May 7, 2014, which means that payment is due June 6, 2014. 

8.  Is the payment processing system secure?

The online payment processing system utilizes a third-party payment provider to process payment transactions. The payment provider's system was created to be secure and address issues of confidentiality, data integrity, non-repudiation, and auditability utilizing industry standard 128-bit encryption, data integrity checking, and logging.

9.  If I pay my company's invoices online, will a receipt or confirmation of payment be provided?

Yes. The payment Web site provides a Receipt of Payment page that provides the amount paid, a transaction number, and date of payment. Please note that these transactions may take 3-4 business days to clear your bank account. This receipt, assuming it is for the full amount invoiced, along with proof of debit from your bank account, constitutes confirmation of your payment. Please see Questions 18 through 25 for issues relating to determination of status of outstanding balances.

Issuer-Specific FAQs

10.  I believe the records maintained by my company regarding my company's shares outstanding are more accurate than those used by the PCAOB. If I provide that data to the PCAOB, may I have my company's shares of the PCAOB and FASB issuer accounting support fees recalculated using that data?

No. Because the issuer accounting support fees are allocated among more than 8,200 issuers, the PCAOB uses market capitalization and net asset value information from nationally-recognized market data sources. These market data sources primarily obtain the number of shares outstanding from issuers' filings with the SEC, which are required to be truthful under penalty of law. This source of data provides a common basis among the issuer population for determining the combined average, monthly market capitalization of all issuers.

If you believe that your company's market capitalization or net asset value information is being reported incorrectly by market data sources, please contact the PCAOB at BillingFAQ@pcaobus.org. The PCAOB will then direct you to contact the appropriate market data source from which it obtained data concerning your company. If the market data source corrects the data errors concerning your company and provides the PCAOB with updated data concerning your company, the PCAOB will recalculate your company's issuer accounting support fee assessments using the revised data from the market data source.

11.  My company became an "issuer" during the preceding calendar year. If it did not have any market capitalization for the months prior to becoming an "issuer," how will those months be considered when calculating the company's average, monthly market capitalization?

As required by the PCAOB's funding rules, the PCAOB uses issuers' average, monthly market capitalizations during the preceding calendar year as a proxy for determining the size of an issuer for purposes of allocating the current year's PCAOB and FASB issuer accounting support fees. Accordingly, the PCAOB uses the monthly market capitalization for only those months of the preceding calendar year that the company had shares outstanding and public share price data available. Therefore, in some situations, the average, monthly market capitalization of an issuer will be based on fewer than the full 12 months.

12.  My company ceased being an "issuer" after the 2014 Calculation Date. Does the company still have to pay its shares of the PCAOB and FASB issuer accounting support fees?

Yes. Under the PCAOB's funding rules, all companies that were "issuers," as that term is defined in PCAOB Rule 1001(i)(iii) and the Act, as of the 2014 Calculation Date are subject to the issuer accounting support fees. The fact that an entity ceases to be an "issuer" after that date does not relieve the issuer of its responsibility for shares of the PCAOB and FASB issuer accounting support fees.

13.  My company ceased being an "issuer" before the 2013 Calculation Date. Does the company still have to pay its shares of the PCAOB and FASB issuer accounting support fees?

No. Under the PCAOB's funding rules, all companies that were not "issuers," as that term is defined in PCAOB Rule 1001(i)(iii) and the Act, as of the 2013 Calculation Date were not subject to the PCAOB and FASB issuer accounting support fees. If you believe your company was not an "issuer" on that date and received invoices in error, please contact the PCAOB at BillingFAQ@pcaobus.org.

14.  If an entity files periodic reports with the SEC on a voluntary basis, will it be considered an "issuer" under the Act and the rules of the Board for purposes of determining whether it is allocated shares of the PCAOB and FASB issuer accounting support fees?

No. If an entity voluntarily files periodic reports with the SEC, the entity is not an "issuer" for purposes of allocating the issuer accounting support fees and will not, therefore, be allocated shares of the issuer accounting support fees. An entity that makes periodic filings with the SEC only pursuant to a requirement contained in its indenture agreement would be an example of such a voluntary filer. This situation is distinguished from one in which a company voluntarily registers securities under Section 12 of the Securities Exchange Act of 1934. In this situation, the issuer is required to file periodic reports and may, if it otherwise satisfied the requirements of PCAOB Rule 7101, be allocated shares of the issuer accounting support fees.

15.  If an issuer was subject to the jurisdiction of a bankruptcy court on the 2014 Calculation Date and has determined that it satisfied the modified reporting requirements of Securities and Exchange Commission Staff Legal Bulletin No. 2 as of that date, must it pay shares of the PCAOB and FASB issuer accounting support fees?

No. Under PCAOB Rule 7101(a)(3), any issuer that was, as of the 2014 Calculation Date, subject to the jurisdiction of a bankruptcy court and has provided an opinion of counsel that the issuer satisfied the modified reporting requirements of Securities and Exchange Commission Staff Legal Bulletin No. 2 ("SLB No. 2") was placed into a class of issuers that is allocated shares of the issuer accounting support fees equal to $0. Separately, the PCAOB staff reviews no-action letters issued by the staff of the SEC with respect to SLB No. 2 to determine whether an issuer has obtained relief from filing audited financial statements while subject to the jurisdiction of a bankruptcy court and assesses such issuer shares of the issuer accounting support fees equal to $0. If your company did not receive a no-action letter from the staff of the SEC with respect to SLB No. 2 but you believe your company satisfied the SLB No. 2 criteria as of the 2014 Calculation Date, please contact the PCAOB at BillingFAQ@pcaobus.org. Consistent with PCAOB Rule 7101(a)(3), you will be asked to provide an opinion of counsel that the company meets the conditions set forth in SLB No. 2.

16.  For an issuer of "global shares," will the average, monthly market capitalization calculation include all of the global shares outstanding?

Yes. Global shares are a single class of shares registered with the SEC and traded in both the issuer's home country (typically Germany) and in the United States. Accordingly, for each global share issuer, the PCAOB included all of the issued and outstanding global shares, regardless of where they were actually held or traded, in its calculation of the issuer's average, monthly market capitalization, consistent with the calculation methodology used for U.S. Equity Issuers.

17.  For a Canadian issuer, will the average, monthly market capitalization calculation include all of its shares outstanding in both the United States and Canada?

A number of Canadian companies have a single class of equity securities registered with the SEC that are listed for trading in both Canada and the United States. For these issuers, all issued and outstanding shares of the class of equity securities that are listed for trading in the United States — regardless of whether the individual shares within that class were actually held or traded in the United States — are included in the calculation of the average, monthly issuer market capitalization. Accordingly, the PCAOB calculated these issuers' shares of the PCAOB and FASB issuer accounting support fees based on the total market capitalization of this class of equity securities, consistent with the calculation methodology used for issuers of "global shares."

Outstanding Balance Status FAQs

18.  What do the PCAOB's rules require an auditor to do with respect to an issuer's shares of the PCAOB and FASB issuer accounting support fees?

PCAOB Rule 7104(b)(1) provides that a registered public accounting firm generally may not (i) sign an unqualified audit opinion with respect to an issuer's financial statements, (ii) issue a consent to include an audit opinion issued previously, or (iii) sign a document, report, notice, or other record concerning procedures or controls of any issuer required under the securities laws, unless the registered public accounting firm has ascertained that the issuer (including any broker or dealer subsidiary of the issuer) has no outstanding past-due share of the accounting support fees of the PCAOB or the FASB or has a petition pursuant to PCAOB Rule 7103(c) pending.

19.  Are there any exceptions to the auditor's requirement under PCAOB Rule 7104(b)?

There are three exceptions.

First, PCAOB Rule 7103(c) allows an issuer, under certain circumstances, to petition for correction of its shares of the PCAOB and FASB issuer accounting support fees. Further, if an issuer (including any broker or dealer subsidiary of an issuer) has a petition for correction pending as to that issuer's outstanding shares, PCAOB Rule 7104(b)(1) does not prohibit a registered public accounting firm from (i) signing an unqualified opinion with respect to that issuer's (or any broker or dealer subsidiary of that issuer) financial statements, (ii) issuing a consent to include an audit opinion issued previously, or (iii) signing a document, report, notice, or other record concerning procedures or controls of the issuer (including any broker or dealer subsidiary of the issuer) required under the securities laws.

Second, PCAOB Rule 7104(b)(2) creates a one-time exception to take account of a situation in which an issuer (or any broker or dealer subsidiary of that issuer) may have a past-due share of the accounting support fees — including possibly through mistake, inadvertence, or confusion — at a time when the issuer needs to access or to preserve its ability to access the capital markets in a timely manner. To avoid unnecessarily preventing issuers in these situations from submitting a report to, or making a filing with, the SEC or from issuing securities, PCAOB Rule 7104(b)(2) creates a one-time, time-limited exception to the prohibition in PCAOB Rule 7104(b)(1).[3] This exception may be invoked only once per assessment.

Third, until further notice, the Board will not enforce Rule 7104(b) against a registered public accounting firm that (i) signs an unqualified audit opinion with respect to an issuer's financial statements, (ii) issues a consent to include an audit opinion issued previously, or (iii) signs a document, report, notice, or other record concerning procedures or controls of any issuer required under the securities laws, with respect to the financial statements of an issuer (or any broker or dealer subsidiary of that issuer) whose outstanding past-due shares of the issuer accounting support fees of the PCAOB or the FASB total less than $50 each.

20.  If an issuer has paid its original shares of the PCAOB and FASB issuer accounting support fees, but not interest due under the PCAOB's rules, may the auditor sign an unqualified opinion?

Interest, which accrues from the date payment is past due, represents the time-value of the shares of the issuer accounting support fees that should have been paid and is therefore treated, for purposes of PCAOB Rule 7104, as part of the assessed shares of the issuer accounting support fees. Accordingly, unless one of the exceptions described in the answer to Question No. 19 above applies, the auditor may not (i) sign an unqualified opinion with respect to an issuer's financial statements, (ii) issue a consent to include an audit opinion issued previously, or (iii) sign a document, report, notice, or other record concerning procedures or controls of any issuer required under the securities laws, even if the only outstanding amount due relates to interest charged on the original amount due. For issuers that owe only interest, auditors should consider whether the third exception noted in the answer to Question No. 19 above applies.

21.  How may an auditor ascertain that an issuer has no outstanding past-due share of the PCAOB and FASB issuer accounting support fees?

Note 1 to PCAOB Rule 7104(b)(2) provides that a registered public accounting firm may ascertain that an issuer has no outstanding past-due share of the issuer accounting support fees by obtaining a representation from the issuer or an affirmation from the staff that no past-due share of the issuer accounting support fees is outstanding.

In addition, the PCAOB posts a list of issuers that have no outstanding past-due share of the issuer accounting support fees of the PCAOB and the FASB, which is available at http://pcaobus.org/About/Ops/Documents/Support%20Fee/Issuers_Paid.pdf.

22.  Is a management representation sufficient to not preclude the auditor from signing an unqualified report?

Yes. For a registered public accounting firm to comply with PCAOB Rule 7104(b)(1), obtaining a representation from the issuer that the issuer has no outstanding past-due share of the PCAOB and FASB issuer accounting support fees is sufficient. In such situations, the registered public accounting firm need not also obtain an affirmation from the staff that no past-due share of the issuer accounting support fees is outstanding. The fact that an issuer is not on the Board's Web site list of issuers that have no outstanding past-due share of the issuer accounting support fees of the PCAOB and the FASB is not, in and of itself, a reason for a registered public accounting firm to believe that an issuer's representation is inaccurate.

23.  Is being listed on the list of issuers that have no outstanding past-due share of the issuer accounting support fees of the PCAOB and the FASB on the PCAOB's Web site sufficient to not preclude an auditor from signing an unqualified report under the PCAOB's rules?

Yes. A registered public accounting firm may take the inclusion of an issuer on this list as an indication that the issuer has no outstanding past-due share of the issuer accounting support fees of the PCAOB and the FASB for purposes of PCAOB Rule 7104(b).

24.  If an issuer is not on the list on the Web site, does that mean it has past-due shares of the PCAOB or FASB issuer accounting support fees?

Not necessarily. Many issuers are not allocated shares of the issuer accounting support fees of the PCAOB or of the FASB under the Board's funding rules and, therefore, would not be on this list even though they have no outstanding past-due share of the issuer accounting support fees. In addition, a brief period of time may pass between when a payment is received by the PCAOB and when the list is updated to reflect that payment.

25.  If an issuer has received an invoice for shares of the PCAOB and FASB issuer accounting support fees but payment is not yet due (payment is due on the 30th day after the invoice is sent), may its auditor sign an unqualified audit report for that issuer?

Yes, so long as there is no past-due share outstanding from a prior year. PCAOB Rule 7104(b)(1) provides that a registered public accounting firm generally may not (i) sign an unqualified audit opinion with respect to an issuer's financial statements, (ii) issue a consent to include an audit opinion issued previously, or (iii) sign a document, report, notice, or other record concerning procedures or controls of any issuer required under the securities laws unless the registered public accounting firm has ascertained that the issuer (including any broker or dealer subsidiary of the issuer) has no outstanding past-due share of the issuer accounting support fees (or broker-dealer accounting support fee as to any broker or dealer subsidiary of the issuer), or has a petition pursuant to Rule 7103(c) pending. If an issuer's shares of the issuer accounting support fees are not yet due, then the issuer has no outstanding past-due share of that year's issuer accounting support fees.

[1] The Board approved amendments to its funding rules on June 14, 2011, to (i) provide for the equitable allocation and assessment among brokers and dealers of an appropriate portion of the accounting support fee and (ii) make certain revisions to the Board's existing rules for the allocation among issuers of the accounting support fee. See PCAOB Release No. 2011-002 (June 14, 2011). The U.S. Securities and Exchange Commission ("SEC" or "Commission") approved the amendments on August 18, 2011. The amended funding rules became applicable for the 2012 issuer funding cycle.

[2]As contemplated in section 109(e) of the Sarbanes-Oxley Act of 2002, as amended, the Financial Accounting Foundation has designated the PCAOB as its collection agent for the purpose of assessing and collecting the FASB accounting support fee.

[3] If this exception is invoked, the registered public accounting firm shall submit to the Board a notice of the signing of the opinion or issuance of the consent no later than the next business day after the filing is made with the Commission. The notice must be submitted electronically by email to rule7104stay@pcaobus.org. This exception shall continue no longer than 15 business days after the earlier of the date of the notice’s submission or the filing of the report with the Commission. See PCAOB Rule 7104(b)(2) and Note 2 to PCAOB Rule 7014(b) for more information. The exception provided by PCAOB Rule 7104(b)(2) does not in any way modify the issuer's legal obligation to pay its assessed shares of the issuer accounting support fees.