AB 1959 - Association Financial Reporting

Feldsott & Lee
A Law Corporation

Assembly Bill 1959 (“AB1959”) was signed by the Governor on September 7, 2006, to make various changes to the governance of business entities. Prior to passage of AB 1959, existing law set forth requirements for the governance of various business entities, including corporations, partnerships, limited liability companies, and capital access companies. This law required specified corporations, partnerships, and limited liability companies to prepare a specified annual report, including, but not limited to a balance sheet, an income statement, and a statement of changes in financial position accompanied by any report of independent accountants.

Most of the changes AB 1959 make are technical and grammatical. AB 1959’s largest change comes in its amendment of Corporations Code §8321 which sets forth the requirements for an annual report. Instead of requiring a balance sheet, an income statement and “a statement of changes in financial position” for the fiscal year, associations will now be required to prepare a balance sheet, an income sheet and “a statement of cash flows” for the fiscal year. Associations should confer with an accountant to be sure of compliance with this change.