Established ABC Practice of Auditing Copies of Newspapers Sold Through Racks or Honor Boxes

ABC PRACTICE OF AUDITING SINGLE COPY SALES

In reporting copies of newspapers sold through vending machines or honor boxes, it is recommended that a publisher divide the cash taken from the boxes by the retail price of the newspaper in order to determine the net sale.

However, it is recognized that publishers cannot always accurately determine net sales from a vending machine or honor box, because of underpayment from some copies and the fact that some copies may be stolen. Accordingly, it has been Bureau's practice to permit a publisher to claim as paid circulation, all copies actually removed from the racks provided the publisher has made a serious effort to determine the accurate net sale by deducting all unsold copies and by making certain that a realistic sum of money is received from each rack.

The Bureau will consider that a realistic sum of money received from rack sales must average at least 75% of the basic retail price.

Auditing of single copy sales shall be of a uniform standard, whether by sales or newsdealer, honor rack or vending machine. If it is necessary to substantiate the cash collections from the vending machine and/or racks or honor boxes, a spot check of the actual retail outlets shall be made.

APPLICATION OF THE POLICY

1000 copies distributed, 200 returns leaving 800 removed. 800 copies x 10¢ (single copy price) = $80 total potential or 100%.

(a) Collected $70 — more than 75%, therefore, 800 qualify as paid.
(b) Collected $50 — 75% of $80 = $60 Difference $10 — converted to copies at .075¢ (75% of the single copy price) per copy = 133 Removed from racks 800 less 133 = 667 copies to be included paid.

From our experience, publishers using pay racks normally collect 80% to 95% of the total potential. Where collections fall below 75% of potential, consideration should be given by the auditor for a special check of sales and collections through racks.

NOTE: The policy applies only to the accounting of sales through vending machines or honor racks.