Restatement costs eat into Diligent

Diligent 12-month price history (NZX.com)

Software firm Diligent Board Member Services has announced a preliminary operating profit of $US6.4 million for the year to December 31, down 40% on the previous year as costs of restating its accounts and governance review mount.

The company, which provides governance software applications, says it has so far spent $US7.8 million on accounting adjustments and a review of its internal governance.

It also shaved about $US4.5 million off its operating revenue for the 2012 financial after a restatement due to the way it recognised revenue.

Overall revenue still climbed 66% to $US64.8 million in 2013 from the restated $US39.12 million (adjusted from $43.73 million) in 2012.

General and administration expenses surged 92% to $US18.4 million in the 12 months to December 31.

Operating income climbed to $US10.3 million from $US7.6 million.

Diligent says it expects additional costs related to the re-audit and restatement of accounts in the first quarter of 2014.

The company’s cash position at balance date was $US56 million. The accounts are unaudited.

The shares gained on the NZX after company said it would meet today's deadline, and last traded up 6.6% at $5.01.

The company had to file restated accounts after recognising revenue too early under US GAAP accounting rules.

"We lacked a sufficient compliment of trained finance and accounting personnel and did not establish adequate accounting and financial reporting policies and procedures as a general matter," the company said in an explanatory note.

"In particular, there were material weaknesses in our control environment and the design, establishment, maintenance and communication of effective controls relating to revenue recognition."

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