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Ending Eternal Liabilities: Updates to Gift Card and Loyalty Program Accounting
Author(s) -
Warne Rick C.
Publication year - 2017
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.22281
Subject(s) - loyalty program , revenue recognition , accounting , business , loyalty , revenue , point (geometry) , loyalty business model , financial accounting , marketing , accounting information system , geometry , mathematics , service quality , service (business)
The Financial Accounting Standards Board recently updated rules regarding revenue recognition, which includes the accounting for gift card and customer loyalty point “breakage.” Breakage is the number of gift cards sold or customer loyalty points that will remain unredeemed indefinitely. Until the recent change, some companies kept the liabilities on their records indefinitely, while other companies reduced the liabilities over time, which created inconsistencies between companies. This article provides an example and discusses the changes related to accounting for gift cards and customer loyalty programs. © 2017 Wiley Periodicals, Inc.