Significant Accounting Policies (Policies)

12 Months Ended

Sep. 30, 2017

Consolidation, Policy [Policy Text Block]

Basis of Presentation:

The consolidated financial statements include the accounts of the Daily Journal and Journal Technologies (collectively the “Company”). All intercompany accounts and transactions have been eliminated in consolidation.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations of Credit Risk:

The Company extends unsecured credit to most of its advertising customers. The Company recognizes that extending credit and setting appropriate reserves for receivables is largely a subjective decision based on knowledge of the customer and the industry. Credit exposure also includes the amount of estimated unbilled sales. Credit limits, setting and maintaining credit standards, and managing the overall quality of the credit portfolio is largely centralized. The level of credit is influenced by the customer’s credit and payment history which the Company monitors when establishing a reserve.

The Company maintains the reserve account for estimated losses resulting from the inability of its customers to make required payments. If the financial conditions of its customers were to deteriorate or its judgments about their abilities to pay are incorrect, additional allowances might be required and its results of operations could be materially affected.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash E

quivalents:

The Company considers all highly liquid investments with original maturities of

three

months or less to be cash equivalents.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments:

The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of their short maturities. In addition, the Company has investments in marketable securities, all categorized as “available-for-sale

” and stated at fair

market value, with the unrealized gains and losses, net of tax

es, reported in

“Accumulated other comprehensive

income

” (AOCI) in the accompanying consolidated balance sheets.

The unrealized gains and losses included in AOCI represent changes in the fair value of the investments due to changes in both market prices and foreign currency exchange rates. The Company uses quoted prices in active markets for identical assets (consistent with the Level

definition in the fair value hierarchy) to measure the fair value of its investments on a recurring basis pursuant to Accounting Standards Codification (“ASC”)

Topic

820,

Fair Value Measurement and Disclosures

. At

September 30, 2017,

the aggregate fair market value of the Company’s marketable securities was

$229,265,000.

These investments had approximately

$165,872,000

of net unrealized gains before taxes of

$64,550,000.

Most of the unrealized gains were in the common stocks of

three

U.S. financial institutions. The bonds have a maturity date in

2039

and are classified as “Current assets” because they are available for sale. At

September 30, 2016,

the Company had marketable securities at fair market value of approximately

$166,634,000,

including approximately

$108,256,000

of unrealized net gains before taxes of

$42,250,000.

Investment in Financial Instruments

	September 30, 20 17						September 30, 201 6
	Aggregate fair value		Amortized/ Adjusted cost basis		Pretax unrealized gains		Aggregate fair value		Amortized/ Adjusted cost basis		Pretax unrealized gains
Marketable securities
Common stocks	$	220,973,000	$	58,449,000	$	162,524,000	$	158,462,000	$	53,436,000	$	105,026,000
Bonds		8,292,000		4,944,000		3,348,000		8,172,000		4,942,000		3,230,000
	$	229,265,000	$	63,393,000	$	165,872,000	$	166,634,000	$	58,378,000	$	108,256,000

he Company perform

ed separate evaluations for equity securities

with a fair value at

September 30, 2017

and

2016

below cost to determine if the unrealized losses

were other-than-temporary. This evaluation

considered a number of factors including, but

not

limited to, the financial condition and near term prospects of the issuer

the Company’s ability and intent to hold the securities until fair value recovers

, and the length of time and extent to which the fair value ha

d been less than cost. The assessment of the ability and intent to hold these securities to recovery focuses on liquidity

needs, asset/liability management and portfolio objectives.

Based on the result of th

e evaluation,

the Company concluded that as of

September 30, 2017

and

2016,

the unrealized loss related to

such marketable securities was temporary.

U.S. GAAP requires that the Company recognize other-than-temporary impairment losses in earnings rather than in accumulated comprehensive income when the security prices remain below cost for a period of time that

may

be deemed excessive even in instances where the Company possesses the ability and intent to hold the security. However, the recording of these impairment losses does

not

necessarily indicate that the loss in value of these securities is permanent.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Intangible Assets:

September 30, 2017

and

2016,

intangible assets were composed of (i) customer relationships of

$2,776,000

and

$7,166,000

(net of the accumulated amortization expenses of

$19,174,000

and

$14,938,000

), respectively, and (ii) developed technology of

$282,000

and

$787,000

(net of accumulated amortization expenses of

$2,243,000

and

$1,738,000

), respectively. These intangible assets are being amortized over

five

years based on their estimated useful lives. Future annual intangible amortization costs are estimated to be approximately

$3,058,000

for fiscal

2018

and

none

thereafter. Intangible amortization expense was

$4,895,000,

$5,037,000

and

$4,907,000

for fiscal

2017,

2016

and

2015,

respectively.

Intangible Assets

	September 30, 201 7									September 30, 201 6
	Customer Relationships			Developed Technology			Total			Customer Relationships			Developed Technology			Total

Gross intangible	$	21,950,000		$	2,525,000		$	24,475,000		$	22,104,000		$	2,525,000		$	24,629,000
Accumulated amortization		(19,174,000	)		(2,243,000	)		(21,417,000	)		(14,938,000	)		(1,738,000	)		(16,676,000	)
	$	2,776,000		$	282,000		$	3,058,000		$	7,166,000		$	787,000		$	7,953,000

Goodwill:

The Company accounts for goodwill in accordance with ASC

350,

Intangibles — Goodwill and Other

. Goodwill is

not

amortized for financial statement purposes but evaluated for impairment annually, or whenever events or changes in circumstances indicate that the value

may

not

be recoverable. The goodwill amount reported in the consolidated balance sheets relates only to Journal Technologies. The Company performed qualitative assessments for Journal Technologies and determined there were

substantive changes during the current year and

indication of impairment. In making this assessment, the Company only considered Journal Technologies’ assets and their revenue generating abilities as required by ASC

350.

Goodwill represents the expected synergies in expanding the Company’s software business. Considered factors for potential goodwill impairment evaluation include the current year’s operating financial results before intangible amortization, fluctuations of revenues, changes in the market place, the status of installation contracts and new business, among other things. As of

September 30, 2017

and

2016,

there was goodwill of

$13,400,000.

Prepaid and Other Current Assets Policy [Policy Text Block]

Prepaid

Expenses

and Other

Current

Assets:

Included in other assets are in-progress installation service costs of

$350,000

as of

September 30, 2017

and

2016

for the legacy projects from the acquisition for which revenues have

not

yet been recognized and are deferred.

Inventory, Policy [Policy Text Block]

Inventories:

Inventories, comprised of newsprint and paper, are stated at cost, on a

first

-in,

first

-out basis, which does

not

exceed current market value.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, plant and equipment:

Property, plant and equipment are carried on the basis of cost or fair value for assets acquired in business combinations. Depreciation of assets is provided in amounts sufficient to depreciate the cost of related assets over their estimated useful lives ranging from

–

years. At

September 30, 2017,

the estimated useful lives were (i)

–

years for building and improvements, (ii)

–

years for furniture, office equipment and software, and (iii)

–

years for machinery and equipment. Leasehold improvements are amortized over the term of the related leases or the useful life of the assets, whichever is shorter. Assets are depreciated using the straight-line method for financial statements and accelerated method for tax purposes. Depreciation and amortization expenses were

$691,000,

$672,000

and

$624,000

for fiscal

2017,

2016

and

2015,

respectively.

Significant expenditures which extend the useful lives of existing assets are capitalized. Maintenance and repair costs are expensed as incurred. Gains or losses on dispositions of assets are reflected in current earnings.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets:

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset

may

not

be recoverable. There were

such impairments identified during fiscal

2017,

2016

and

2015.

Research, Development, and Computer Software, Policy [Policy Text Block]

Journal Technologies

’ Software Development Costs:

Development costs related to software products for sale or licensing are expensed as incurred until the technological feasibility of the product has been established. Thereafter, until the product is released for sale, software development costs are capitalized and reported at the lower of unamortized cost or net realizable value of the related product. The establishment of technological feasibility and the ongoing assessment of recoverability of costs require considerable judgment by the Company with respect to certain internal and external factors, including, but

not

limited to, anticipated future product revenue, estimated economic life and changes in hardware and software technology.

The Company believes its process for developing software is essentially completed concurrent with the establishment of technological feasibility, and accordingly,

software development costs have been capitalized to date.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition:

For the Traditional Business, proceeds from the sale of subscriptions for newspapers, court rule books and other publications and other services are recorded as deferred revenue and are included in earned revenue only when the services are provided, generally over the subscription term. Advertising revenues are recognized when advertisements are published and are net of commissions.

Journal Technologies recognizes revenues in accordance with the provisions of ASC

985

605,

Software—Revenue Recognition

. Revenues from license, maintenance and support contracts generally call for the Company to provide software updates and upgrades to customers and are recognized ratably over the maintenance period. Consulting and other services are recognized upon completion of the services and acceptance by the customers under the completed performance method. The Company elects to use the completed performance method because each customer’s acceptance is unpredictable and reliable estimates of the progress towards completion cannot be made. Only after a customer’s acceptance of a completed project does the customer realize value, and any advances are generally

longer at risk of refund and are therefore considered earned.

Journal Technologies has established Vendor Specific Objective Evidence (VSOE) of fair value of the annual maintenance

and the coterminous license, maintenance and support because a substantial majority of the Journal Technologies’ actual maintenance and coterminous license, maintenance and support renewals is within a narrow range of pricing for the contracts and is deemed substantive.

In certain arrangements that include licenses, maintenance and services for multiple case types, we are unable to establish VSOE of fair value for all undelivered elements, due to the lack of VSOE over services at the inception of these arrangements. In these instances, when all other conditions for revenue recognition are met, revenues are recognized ratably over the longer of the period of the license or the services.

Other public service fees, as disclosed in the consolidated statements of comprehensive income (loss), are primarily service fees earned and recognized as revenues at the time the Company processes credit card payments on behalf of the courts via its ePayIt secure websites through which general public users can pay traffic citations and obtain traffic school information.

Approximately

58%,

56%

and

57%

of the Company’s revenues in fiscal

2017,

2016

and

2015,

respectively, were derived from sales of software licenses, annual software licenses, maintenance and support agreements and consulting services that typically include implementation and training.

The change in allowance for doubtful accounts is as follows:

Allowance for Doubtful Accounts

Description	Balance at Beginning of Year		Additions Charged to Costs and Expenses		Accounts Charged off less Recoveries			Balance at End of Year
Fiscal 2017
Allowance for doubtful accounts	$	200,000	$	33,000	$	(33,000	)	$	200,000
Fiscal 2016
Allowance for doubtful accounts	$	250,000	$	5,000	$	(55,000	)	$	200,000
Fiscal 2015
Allowance for doubtful accounts	$	250,000	$	61,000	$	(61,000	)	$	250,000

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Management Incentive Plan:

In fiscal

1987,

the Company implemented a Management Incentive Plan (the “Incentive Plan”) that entitles a participant to participate in pretax earnings before adjustment for certain items of the Company. In

2003,

the Company modified the Incentive Plan to provide participants with

three

different types of non-negotiable incentive certificates based on the nature of the particular participants’ responsibilities. Each certificate entitles the participant to a specified share of the applicable pretax earnings in the year of grant and to receive the same percentage of pretax earnings to be generated in each of the next

nine

years provided they remain with the Company or are in retirement after working for the Company to age

65.

If a participant dies while any of his or her certificates remain outstanding, future payments under those certificates will be made to the deceased participant’s beneficiaries.

In fiscal

2015,

after combining Sustain, New Dawn and ISD into

one

company, the Company converted each existing Sustain Non-negotiable Incentive Certificate along with its supplemental Addendum to a new “Journal Technologies Non-negotiable Incentive Certificate” coupled with a similar supplemental Addendum which

defines how the value of the Journal Technologies Certificate will be paid upon a triggering event such as a sale of Journal Technologies or an initial public offering. Employees and consultants of Journal Technologies are eligible to participate in these “Journal Technologies Certificates”. Payouts under the Journal Technologies Certificates are calculated based on the pretax income of Journal Technologies before supplemental compensation expenses, workers’ compensation expenses, intangible amortizations and goodwill impairment. Also effective fiscal

2015,

the calculation of payouts under the Daily Journal Non-Consolidated Certificates is based on the pretax earnings of the traditional publishing business before supplemental compensation expenses, workers’ compensation expenses, financing costs of the non-traditional business activities and any write-downs of unrealized losses on investments. The calculation of payouts under the Daily Journal Consolidated Certificate remains unchanged. For any certificate held by an employee who is expected to become retirement eligible during the

year period of the certificate, the Company recognizes the future commitments at each fiscal year-end over the period from the grant date through retirement eligibility.

Certificate interests entitled participants to

receive

5.12%,

4.49%

and

4.13%

(amounting to

$268,250,

$271,350

and

$198,915,

respectively) of Daily Journal non-consolidated income before taxes, workers’ compensation, supplemental compensation and certain other items,

8.53%,

8.30%

and

7.07%

(amounting to

$0,

and

$10,600

for fiscal

2017,

2016

and

2015,

respectively) for Journal Technologies and

8.2%,

8.2%

and

8.2%

(amounting to

$0,

and

$0,

respectively) for Daily Journal consolidated in fiscal

2017,

2016

and

2015.

The Company accrued

$135,000

and

$62,000

as of

September 30, 2017

and

2016,

respectively, for the Plan’s future commitment for those who will still have Certificates at the age of

65.

This future commitment included an increase in the accrual in fiscal

2017

$75,000

$.06

per outstanding share on an adjusted pretax basis as compared with an increase in fiscal

2016

$15,000

$.01

per outstanding share due to increased estimated future pretax income. The estimated Incentive Plan’s future commitment is calculated using Level

inputs, as defined in the fair value hierarchy, based on an average of the past year and the current year pretax earnings before certain items, discounted to the present value at

since each granted Unit will expire over its remaining life term of up to

years.

Income Tax, Policy [Policy Text Block]

Income taxes:

The Company accounts for income taxes using an asset and liability approach which requires the recognition of deferred tax liabilities and assets for the expected future consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax basis of the assets and liabilities. The Company accounts for uncertainty in income taxes under ASC

740

which prescribes a recognition threshold and measurement methodology to recognize and measure an income tax position taken, or expected to be taken, in a tax return. The evaluation of a tax position is based on a

two

-step approach. The

first

step requires an entity to evaluate whether the tax position would “more likely than

not”

be sustained upon examination by the appropriate taxing authority. The

second

step requires the tax position be measured at the largest amount of tax benefit that is greater than

50%

likely of being realized upon ultimate settlement. In addition, previously recognized benefits from tax positions that

longer meet the new criteria would be derecognized.

Earnings Per Share, Policy [Policy Text Block]

Net

(loss)

income per common share

The net (loss) income per common share is based on the weighted average number of shares outstanding during each year. The shares used in the calculation were

1,380,746

for fiscal

2017,

2016

and

2015.

The Company does

not

have any common stock equivalents, and therefore basic and diluted net income per share is the same.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates:

The presentation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The long-term Incentive Plan accrual is calculated using Level

inputs, as defined in the fair value hierarchy, based on an average of the past year’s and the current year’s pretax earnings, discounted to the present value at

since each granted Unit will expire over its remaining life term of up to

years. Actual results could differ from these estimates.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements:

November 2015,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

No.

2015

17,

Income Taxes (Topic

740

): Balance Sheet Classification of Deferred Taxes

. This update requires deferred tax liabilities and assets to be classified as noncurrent in the consolidated balance sheet. The standard is required to be adopted for annual periods beginning after

December 15, 2016,

including interim periods within that annual period, which is the Company’s fiscal

2018.

The Company has adopted this guidance effective

October 1, 2017

and concluded that it has

significant impact on the Company’s financial condition, results of operations or disclosures because it is simply a reclassification of current deferred taxes to non-current deferred taxes with an itemization of federal and state deferred taxes under separate lines.

May 2014,

the FASB issued ASU

No.

2014

09,

Revenue from Contracts with Customers (

ASC

Topic

606

)

. This update clarifies the principles for revenue recognition in transactions involving contracts with customers. The new revenue recognition guidance provides a

five

-step analysis to determine when and how revenue is recognized. The new guidance will require revenue recognition to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. In

August 2015,

the FASB issued ASU

No.

2015

14,

Revenue from Contracts with Customers (Topic

606

): Deferral of Effective Date

. This update defers the mandatory effective date of its revenue recognition standard by

one

year. The standard is required to be adopted for annual periods beginning after

December 15, 2017,

including interim periods within that annual period, which is the Company’s fiscal

2019.

Early application is permitted for annual reporting periods beginning after

December 15, 2016,

and interim periods within that annual period, which is the Company’s fiscal

2018.

March 2016,

the FASB issued ASU

No.

2016

08,

Revenue from Contracts with Customers (ASC Topic

606

): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)

, providing guidance regarding the application of ASU

2014

when another party, along with the reporting entity, is involved in providing a good or a service to a customer. In

April 2016,

the FASB issued ASU

No.

2016

10,

Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing

, which clarifies the identification of performance obligations and the licensing implementation guidance. In

May 2016,

the FASB further issued ASU

No.

2016

12,

Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients

providing guidance in certain narrow areas and adding some practical expedients. Either the full retrospective basis (to the beginning of its contracts) or modified retrospective method (from the beginning of the latest fiscal year of adoption) is permitted. The effective dates for these ASUs, which are the same as the effective date for ASU

No.

2014

09,

Revenue from Contracts with Customers

, will be the Company’s fiscal

2019

annual and interim periods.

The Company has completed its preliminary evaluation of these ASUs and concluded that the adoption of these ASUs in fiscal

2018

will

not

have significant impact on the Company

’s financial condition, results of operations or disclosures because the Company has been utilizing the completed performance method of accounting, pursuant to which the Company does

not

recognize revenues for implementation services or licenses, maintenance, support and hosting services until after the services have been performed and accepted by the customer (go-live), due to the fact that the customer’s acceptance is typically unpredictable and reliable estimates of the progress towards completion cannot be made. Thus, the Company’s existing revenue recognition policy is already in conformity with

ASU

No.

2014

09,

Revenue from Contracts with Customers (Topic

606

)

which calls for revenue recognition at the point of delivery when a performance obligation is fulfilled. Consequently, the Company believes there are

required retrospective or accumulated catch-up adjustments with respect to prior years’ financial figures, as revenues have been recognized consistently in the same manner throughout these fiscal periods. The Company will continue to monitor and assess the impact of any changes to the standard and interpretations as they become available.

January 2016,

FASB issued “ASU”

No.

2016

01,

Financial Instruments – Overall (Subtopic

825

): Recognition and Measurement of Financial Assets and Financial Liabilities

. This ASU updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments and applies to all entities that hold financial assets or owe financial liabilities. It requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in Other Comprehensive Income changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available-for-sale debt securities in combination with other deferred tax assets. The Update also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. This ASU is effective for public business with fiscal years beginning after

December 15, 2017,

including interim periods within that annual period, which is the Company’s fiscal

2019.

The Company plans to begin its assessment in fiscal

2018

to evaluate what impact, if any, the adoption of this ASU

may

have on its financial condition, results of operations or disclosures.

January 2017,

FASB issued ASU

No.

2017

04,

Intangibles – Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment

. This ASU simplifies how an entity is required to test goodwill for impairment by eliminating Step

from the goodwill impairment test and requiring impairment charges to be based on Step

which is to compare the fair value of a reporting unit with its carrying amount. A goodwill impairment should be recognized in the amount by which the carrying amount exceeds the reporting unit’s fair value. This ASU is effective for public business with fiscal years beginning after

December 15, 2019,

which is the Company’s fiscal

2021.

Early adoption is permitted for annual and interim goodwill impairment testing dates after

January 1, 2017.

The Company has

not

yet evaluated what impact, if any, the adoption of this ASU

may

have on its financial condition, results of operations or disclosures because it is

not

required to be adopted for several years.

February 2016,

the FASB issued ASU

2016

02,

Leases (Topic

842

)

. This update requires that all leases be recognized by lessees on the balance sheet through a right-of-use asset and corresponding lease liability, including today’s operating leases. This standard is required to be adopted for annual periods beginning after

December 15, 2018,

including interim periods within that annual period, which is the Company’s fiscal year

2020.

The Company has

not

yet evaluated what impact, if any, the adoption of this guidance

may

have on its financial condition, results of operations or disclosures.

other new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company

’s consolidated financial statements.