Daily Journal Corporation Clarifies Accounting Practices Amid Buxton Helmsley USA, Inc. Claims

Daily Journal Corporation has issued a press release providing additional public access to its recent Form 8-K filed with the SEC. The Form 8-K responds to a letter from Alexander E. Parker of Buxton Helmsley USA, Inc. who claims that Daily Journal should capitalize software development costs instead of expensing them. The Company believes its accounting is correct and has been reviewed by three national accounting firms.

Daily Journal Corporation has issued a press release providing additional public access to its recent Form 8-K filed with the Securities and Exchange Commission (SEC). The Form 8-K responds to a letter from Alexander E. Parker of Buxton Helmsley USA, Inc., who claims that Daily Journal should capitalize software development costs instead of expensing them. The company maintains that its accounting practices are correct and have been reviewed by three national accounting firms.

The controversy stems from an activist investor's demand for the company to change its accounting policy regarding software development costs. Parker claims that capitalizing these costs could unlock $160 million in value for the company. In exchange for his consulting services, Parker's firm would be awarded up to $24 million of Daily Journal stock if the company's market value rises by up to $160 million [1].

Daily Journal's current policy is to expense software development costs, which reduces current period net income. The company argues that this policy is consistent with its conservative accounting principles and the nature of its software development process. The company maintains that software reaches technological feasibility concurrently with its general release, making capitalization unnecessary [1].

The company's CEO, Steven Myhill-Jones, has stated that the key point in making an expense vs. capitalization decision involves when the software reaches "technological feasibility." Myhill-Jones asserts that the company's process means that technological feasibility is reached at the same time as the general release of the software [1].

Parker has accused the company of improper accounting and has demanded two board seats and consulting services. However, Daily Journal has hired another consultant to evaluate its accounting methodology and has reported Parker to the SEC for his persistent demands [1].

The company's conservative accounting practices have been a hallmark of its operations for decades, particularly under the guidance of Charlie Munger, who served as Chairman for many years. Munger's legacy of integrity and conservative accounting principles is well-known in the industry [1].

The company's shareholders are likely to be skeptical of Parker's demands, given the company's long history of conservative accounting practices and the fact that informed investors are already aware of the company's accounting policy regarding software development costs [1].

References:
[1] https://rationalwalk.com/daily-journal-accused-of-incorrect-accounting/