Hachette USA, Inc., As Successor to Hachette Publications, Inc. and Curtis Circulation Co., Subsidiary - Page 7

                                        - 7 -                                         
          account for sales, such as, for example, at the time of shipment            
          or title passage or acceptance, but the expectation that some of            
          the merchandise may be returned after the date of sale for credit           
          or refund does not warrant the postponement of accrual.  The way            
          that the accrual method of accounting corrects the overstatement            
          of income resulting from the return of merchandise is by allowing           
          the seller a deduction in the year of return for the amount of              
          the credit or refund given to the purchaser.  In periods of                 
          generally rising sales and fairly constant rates of merchandise             
          returns this method of accounting leads to persistent                       
          overstatement of income.  In the print and sound recording                  
          industries, where merchandise returns regularly constitute a                
          substantial percentage of total sales, the general accrual                  
          principles were perceived to be inconsistent with economic                  
          realities and unfair.                                                       
               The Senate Finance Committee report accompanying the Revenue           
          Act of 1978 gave its assessment of the problem as follows:                  
               Reasons for change                                                     
                    Publishers and distributors of magazines,                         
               paperbacks, and records often sell more copies of their                
               merchandise than it is anticipated will be sold to                     
               consumers.  This "overstocking" is part of a mass-                     
               marketing promotion technique, which relies in part on                 
               conspicuous display of the merchandise and ability of                  
               the retailer promptly to satisfy consumer demand.                      
               Publishers usually bear the cost of such mass-marketing                
               promotion by agreeing to repurchase unsold copies of                   
               merchandise from distributors, who in turn agree to                    
               repurchase unsold copies from retailers.  These unsold                 
               items are commonly called "returns".                                   





Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011