As the world trudges - make that "sprints" - towards a system of international financial reporting, one becomes curious as to how all that international standard setting is going to be financed.

Here in the United States, the FASB had long funded itself by passing around the hat: it relied on contributions from corporations, auditing firms and to a much lesser degree, investors. That funding strategy didn't do much for the appearance of FASB's independence from its constituents. With the Sarbanes-Oxley Act, the FASB's funding came straight from the SEC, eliminating its dependence on well-heeled constituents. As long as the SEC acts in the interests of investors - the intended beneficiaries of financial reporting, by the way - investors would have to feel more comfortable with the SOX set-up than the previous funding mechanism. 

The IASB, torch-bearer for the international reporting movement, still has a funding model that looks a lot like what the FASB had in place, pre-SOX. Last Monday, the IASB released an update on its funding plan for 2008.

The IASB considers its funding plan to be "broad-based, compelling, open-ended and country-specific"; it needs £16 million for 2008 and it believes it has £12.5 million secured. The funding comes from 19 different countries, based on the proportions of a country's GDP to the whole pot. That funding from each individual country is not necessarily coming from investors: it's expected to come from voluntary contributions by preparer companies within the countries, and sometimes from a country's stock exchanges or  accounting standard-setter.

The US is expected to contribute a little over £2 million from 32 companies. They must be expecting to be using IFRS soon; seems a little strange to see contributions from US companies when they can't report under that system yet. At the same time, many multinationals domiciled here have to use IFRS in their foreign subsidiaries, so it's not entirely strange.

Nowhere in the plan is there an indication of funding from investor groups. Perhaps the most interesting thing is that there is also funding from the US Fed of £200,000 - and a lot from the Big 4 international accounting firms. Combined with next-tier accounting firms, they'll contribute about £4.3 million in 2008 - about 27% of the expected budget, and 34% of the funds raised to date. It sure looks like the old FASB model of funding - and a sure-fire recipe for agitation by countries whose constituents might not like standards the IASB develops. And if you think the IASB standards are "principles-based" right now, with this much auditor involvement in IASB operations, there's the opportunity for international standards to become more minutiae-oriented down the road when auditing firms would like to have something in black-and-white for dealing with stubborn clients. Hopefully, the IASB has longer-range plans for funding independence.