Obscure accounting change could boost Amazon, Starbucks, Wal-Mart profits by hundreds of millions of dollars
Big-name retailers including Amazon, Starbucks and Wal-Mart should see a major benefit from the landmark new revenue-recognition standard that will hit bottom lines directly starting in the first quarter of 2018.
The largest retailers are still evaluating the final overall impact of the new Financial Accounting Standards Board, or FASB, revenue-recognition rule called ASC 606, which is effective for public companies in 2018. One significant positive impact of the new rules for retail businesses could be how revenue from the unredeemed portion of company-issued gift cards, called breakage revenue, is recognized.
Most companies will be able to accelerate breakage revenue rather than holding onto it until the likelihood anyone cashes in the balance becomes remote or until the card expires. The accounting change will affect everyone who issues gift cards, from classic bricks-and-mortar grocery and fashion retailers to restaurants to Amazon and other online stores.
This makes sense to me, I don’t know how many gift cards I’ve forgot about/misplaced over the years. My favorite was a Blockbuster one I found a couple years ago when I was cleaning, so much for no expiration!
