Credit Cancels—Direct Accounting Method Update

Effective July 16, 2007

Magazines currently account for copies served on credit, for which no payment has been received in seven months, on either a per-issue basis (direct method) or on an average basis (averaging method). For publications using the direct method, the auditor must wait up to seven months following the close of an issue to get final credit cancellation figures to report correct subscription figures.

Effective immediately, at the July 2007 meeting, the Board endorsed the use of a new hybrid method of accounting for credit cancels for those publications where the audit is ready to be completed, with the exception of waiting for final credit cancel figures. This new method allows the auditor to use existing credit cancel methodology for all issues that have already completed the seven-month wait time. For the other issues which remain open, the publisher will be required to derive a bad pay copy count for all unpaid and not cancelled copies based on a methodology agreed upon by the auditor and their audit management. This will allow for finalization of audit figures in a timelier fashion.

For those publications that have their audit completed using this method to finalize audit results, the publisher will be required to provide an estimate based on historical pay-up rates of the remaining subscribers on file that will cancel or pay for their open order. This estimation process will be reviewed by the auditor for its acceptance to be used in the audit. If an auditor finds that historical information is not representative of the current conditions, the publication will be required to maintain the traditional direct method or select to convert to the average method. The estimating method will not be accepted until the historical information is representative.

When the final credit cancellation figures on all subscriptions of a completed audit are ready, the auditor will perform a comparison of the final cancels versus the estimation used for closing the audit. In situations where this comparison will adjust figures to the degree that an issue will miss rate base, the Audit Report will be immediately reissued by ABC with the final figures. For all publications using this new method to finalize the audit, the subsequent released audit will provide a comparison of circulation figures reflecting the final auditor figures if variances are found.

Posted 07/25/07