S&P: Reader's Digest unaffected

Standard & Poor's said Friday that its ratings on negative outlook on Reader's Digest Association Inc. (BB/negative/--) are not affected by the company's announcement that it has revised its accounting policy for magazine direct response promotion costs.

As a result, Reader's Digest has incurred a one-time charge of $27 million as of June 30, 2004 and will amortize the remaining $77 million balance of deferred magazine costs during the fiscal year ending June 30, 2005.

The change in the company's accounting policy for magazine promotion costs is based on new strategies and initiatives, as well as uncertainty in response rates. Reader's Digest will begin expensing all magazine promotion costs as incurred effective July 1, 2004.

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