Skip to main content

Upcoming gift-card change could have bottom-line impact


An accounting change could give a big boost to retailers' earnings.

The new Financial Accounting Standards Board, or FASB, revenue-recognition rule (ASC 606) goes into effect for public companies in 2018. One of the major implications of the new rule involves how the unredeemed dollar portion of company-issued gift cards, called breakage revenue, is recognized, according to a report by MarketWatch. The change will impact everyone who issues gift cards, including both online and offline retailers.

"Under the new standard, hundreds of millions of gift-card breakage revenue may get recognized earlier," Olga Usvyatsky, VP of research at Audit Analytics, told MarketWatch.

Retailers that currently use five years as the time when the probability of redemption finally becomes remote will see the biggest positive impact from the change, the report said. Those that use between 24 and 60 months will still feel the impact of a change to a redemption period that will likely be a year or less.

Click here to read more.

This ad will auto-close in 10 seconds