Citing "inflationary economic conditions" that have boosted the costs of acquiring subscriptions for Newsweek magazine in relation to subscription revenues, the Washington Post Co. announced yesterday a one-time charge to 1979 earnings that will trim profits by about $13.5 million (86 cents a share).
Vice president for finance Martin Cohen said an accounting change will result in the special charge to income.
He said that since 1971 Newsweek Inc., a Post Co. subsidiary, has amortized the costs of getting new subscriptions over the lives of subscriptions involved. Under the change announced yesterday, such costs will be charged against income as they occur.
As in the past, prepaid subscription revenues will be recognized only as copies are delivered, Cohen said in a statement.
Both methods of accounting for subscription costs are acceptable and each is in wide use in the publishing business, according to Cohen.
In the case of Newsweek, the subscription costs have increased in an era of inflation and this condition would be "accentuated by any new magazine publishing ventures," the company's statement continued. The Post Co. subsidiary already has test-marketed a publication called Inside Sports and other possible magazine ventures are being studied.
Thus, the Post Co. decided that the "expensed-as-incurred" method of accounting for subscription costs has become preferable "as a better reflection of the effects of inflation on the company's operations, and has therefore been adopted in order to report more conservatively," the statement added.