• Lauchs@lemmy.world
    link
    fedilink
    English
    arrow-up
    5
    arrow-down
    2
    ·
    10 months ago

    Nope, the money is counted as income straight away. Think about the process: person gives cash for gift card. Merchant now had the money and a promise to give that amount of inventory at a future date. Some of those promises are never acted upon, in which case merchant has the gift card money AND the merch which they can also sell.

    • KevonLooney@lemm.ee
      link
      fedilink
      English
      arrow-up
      3
      arrow-down
      1
      ·
      10 months ago

      Why would you comment on something you know nothing about?

      Basic gift card revenue recognition

      Companies cannot recognize revenue upon the initial sale of a gift card because of a key revenue recognition principle that states that revenue is recognized when or as an entity satisfies a performance obligation by transferring a promised good or service to a customer.

      https://blog.leapfin.com/how-to-properly-recognize-gift-card-revenue

      • xordos@lonestarlemmy.mooo.com
        link
        fedilink
        English
        arrow-up
        2
        ·
        10 months ago

        This is a good read. And also looks like it does mentioned unredeemed gc balance can be (partially) considered as breakage income? ( I don’t know anything about accounting, just want to point this out)

      • Lauchs@lemmy.world
        link
        fedilink
        English
        arrow-up
        1
        arrow-down
        1
        ·
        10 months ago

        Ha, completely forgot about this.

        You should read that article carefully though. They even outline why this is a money maker later:

        You might be wondering, how did I get $1650 in total revenue from a $1500 sale? Well, it’s true, because you were able to take 10% of the gift card in breakage income, and on an individual order/customer it can look funny, but on the whole, with your P&L, it’ll be offset by another gift card purchase not being used and money that was “indefinitely deferred!”

        So, uhhh, I guess I’d ask, why would you comment on something about which you know nothing?