Gift Card Breakage Revenue: When and How to Recognize It

May 30, 2025
Jason Berwanger
Accounting

Learn when revenue for gift card breakage should be recognized to ensure accurate financial reporting and compliance with accounting standards.

Gift card, coins, and hourglass symbolize gift card breakage revenue.

Gift cards are great, but unredeemed balances, known as gift card breakage, create unique accounting questions. This gift card breakage revenue can be significant, so understanding how to recognize it is crucial. We'll cover the gift card breakage definition, its importance, and the challenges of recognizing this revenue. We'll explore ASC 606, the key accounting standard that dictates when revenue for gift card breakage should be recognized. Plus, we'll share practical tips for estimating breakage accounting amounts, handling legal issues, and using technology to improve your gift card program.

Key Takeaways

  • Unredeemed gift cards are revenue: Gift card breakage, representing the unredeemed portion of gift cards, is recognized as revenue and requires careful accounting under ASC 606. Accurate tracking and reporting are essential for sound financial management.
  • Data-driven estimates are key: Estimating breakage involves analyzing historical redemption rates and using statistical models to predict future trends. Regularly reviewing and refining these estimates ensures they remain accurate and reflect current consumer behavior.
  • Technology simplifies management: Automated revenue recognition software and integrations with existing accounting systems streamline gift card accounting, minimizing errors and ensuring compliance with ASC 606. This simplifies processes and allows for more informed financial decisions.

What Is Gift Card Breakage?

Gift card breakage is a key concept for any business selling gift cards. It represents the portion of gift card sales that customers never redeem—the "leftover" value from gift cards that are lost, forgotten, or expire. This seemingly small detail has significant implications for your financial reporting and revenue recognition.

Gift Card Breakage Defined

Gift card breakage, simply put, is the value of unredeemed gift cards. Baker Tilly defines breakage as the portion of gift card sales that a business estimates and recognizes as revenue over time. It's not just about physically lost cards; it also includes small, impractical balances and forgotten cards. Paytronix highlights breakage as both a potential revenue source and an accounting challenge, emphasizing the need for accurate estimation.

Why Gift Card Breakage Matters

Understanding gift card breakage is crucial for accurate financial reporting and compliance. PwC explains that unredeemed gift card balances (breakage) are considered revenue and must be accounted for appropriately. Your revenue recognition depends on your company's expectations regarding breakage. Accurate gift card accounting, including breakage, is vital to avoid financial misstatements and potential legal issues, as noted by Paytronix. Getting this right is essential for maintaining a healthy financial standing.

Examples of Gift Card Breakage

Let’s illustrate gift card breakage with a few scenarios. Imagine a customer buys a $50 gift card for a coffee shop. They use $45, leaving a $5 balance. If they forget about this small amount or consider it too insignificant to use, that $5 becomes breakage. This aligns with Baker Tilly's definition of breakage, which includes small, impractical balances. Similarly, a misplaced or lost gift card, whether physical or digital, contributes to breakage as the value remains unredeemed.

Another example involves a gift card given for a specific store that the recipient rarely visits. The card might get tucked away and forgotten, or the recipient may simply not find anything they want to purchase at that particular store. Over time, the value of this unused gift card becomes breakage. These scenarios highlight how breakage arises not just from lost cards but also from changing consumer behavior and the perceived value of small balances. As Leapfin explains, companies can use historical data to estimate and recognize this breakage income proportionally to actual redemptions. This approach ensures that revenue recognition related to gift card breakage is handled accurately and reflects actual business performance. For high-volume businesses dealing with complex revenue streams, automating this process can be crucial for accurate financial reporting. Consider exploring automated revenue recognition solutions to streamline your gift card accounting and ensure compliance with revenue recognition standards like ASC 606.

Gift Card Breakage and ASC 606

Gift card breakage represents the portion of gift card value that a company predicts will go unredeemed. This prediction isn't a guess—it's a calculated estimate based on historical data and consumer behavior. Understanding how to account for this breakage is crucial for accurate financial reporting, and that's where ASC 606 comes in.

Pre-ASC 606 Accounting Methods

Before ASC 606, companies used various methods to account for gift card breakage. Understanding these pre-ASC 606 methods provides context for the current standard and highlights how the accounting for this revenue stream has evolved. These older methods, while acceptable at the time, often lacked the precision and comprehensive approach of ASC 606.

Released Obligation Method

With the released obligation method, breakage revenue was recognized when a gift card’s redemption became unlikely. This meant companies could recognize revenue when they believed the chance of a customer using the gift card was very low. This method, while simpler, could lead to inconsistencies and potentially premature revenue recognition.

Remote Method

The remote method was even more restrictive. Companies could only use this method if they expected zero breakage. If any breakage was anticipated, this method wasn't applicable, making it suitable for only very specific situations, as outlined in resources like this one from Katz, Sapper & Miller (KSM) discussing pre-ASC 606 methods.

Redemption Pattern Method

The redemption pattern method offered a more proportional approach. Breakage revenue was recognized proportionally as customers redeemed their gift cards. This method provided a more accurate reflection of revenue earned over time, aligning revenue recognition closer to actual customer behavior. As the KSM article explains, this method became the basis for the approach largely adopted under ASC 606.

Implementation Dates for ASC 606

ASC 606 introduced significant changes to revenue recognition, including how gift card breakage is accounted for. Public companies adopted the new standard by the end of 2018, while most private companies had until the end of 2019. This staggered rollout gave companies time to adjust their systems and processes to comply with the new guidelines. Resources like the KSM article offer further details on these implementation dates and the overall impact of ASC 606. For high-volume businesses seeking to automate revenue recognition and ensure compliance, exploring solutions like those offered by HubiFi can be a valuable step.

How ASC 606 Affects Gift Card Breakage

ASC 606, the revenue recognition standard, provides guidelines on how to account for gift card breakage. It dictates that breakage revenue should be recognized when control of the goods or services associated with the gift card is transferred to the customer. This typically happens as the gift card is redeemed. However, if it's determined that it's unlikely a gift card will ever be redeemed, the revenue can be recognized then. This approach ensures that revenue is recognized in a way that reflects the actual exchange of value between the business and the customer.

Key Revenue Recognition Principles

Several key principles govern how gift card breakage is recognized under ASC 606:

  • Breakage is Revenue: Unredeemed gift card balances are considered revenue. This means businesses need to account for breakage as part of their overall revenue reporting, not as a separate item. For more information, see PwC's guidance on unexercised rights.

  • Timing is Key: When you recognize breakage revenue depends on your expectations of redemption. If you anticipate customers will eventually use their gift cards, revenue is recognized proportionally as those cards are redeemed. If redemption is unlikely, revenue can be recognized when that becomes clear. PwC's guidance offers further clarification.

  • Estimate and Refine: Estimating the amount of breakage is a critical step. This estimate should be based on historical data and regularly reviewed and updated to reflect current trends. Baker Tilly offers insights into gift card accounting.

  • Accurate Recording: Properly recording breakage revenue involves specific journal entries, typically debiting deferred revenue and crediting breakage revenue. This ensures your financial statements accurately reflect the revenue earned from unredeemed gift cards. This aspect of gift card accounting is also covered in Baker Tilly's article.

  • Legal Compliance: Be mindful of state and local laws regarding unused gift card balances. These regulations can influence how breakage is accounted for and may vary by jurisdiction. PwC offers guidance on these legal considerations.

Estimating Breakage Revenue

Accurately estimating gift card breakage is crucial for compliant revenue recognition. This involves forecasting the portion of gift card value that customers are unlikely to redeem. While it might seem simple, several factors influence this estimation process.

Analyzing Historical Redemption Rates

One of the most reliable methods for estimating breakage involves analyzing your historical redemption rates. Review your data over the past five to ten years to identify trends. For example, if your company sold $100,000 in gift cards five years ago, track the redemption patterns year by year. This historical view helps project how much value will likely go unredeemed. Baker Tilly offers helpful resources on this topic, specifically for the restaurant industry, but the principles apply broadly.

Using Statistical Modeling to Predict Breakage

Beyond historical analysis, statistical modeling offers a more sophisticated approach. These models incorporate various factors, including seasonal trends, customer demographics, and promotional campaigns, to predict future redemption behavior. Remember, accurately estimating breakage relies on regularly updating these models with current data and staying informed about industry trends, as highlighted by PwC.

Segmenting Customer Data for Accurate Estimates

For even more precise breakage estimates, consider segmenting your customer data. Grouping customers based on purchase history, demographics, or other relevant factors allows for more targeted analysis. For instance, you might find that frequent buyers redeem gift cards at a higher rate than occasional shoppers. This granular approach helps refine your overall breakage estimate and ensures more accurate financial reporting, which, as Paytronix emphasizes, is essential for maintaining a healthy financial image for stakeholders. By understanding and applying these estimation methods, businesses can effectively manage gift card breakage and its impact on revenue recognition.

Breakage Statistics and Trends

Understanding gift card breakage statistics and trends provides valuable insights for financial planning and revenue recognition. An estimated $1 billion in unredeemed gift cards annually highlights the significance of breakage income. This unredeemed value, known as breakage, becomes recognized revenue, impacting a company's financial statements. This makes accurate breakage estimation crucial for sound financial management.

Analyzing historical redemption rates is a practical starting point. Reviewing data from the past five to ten years reveals patterns and trends in gift card redemption behavior. This historical perspective helps predict future unredeemed amounts. This data-driven approach ensures that breakage estimates are grounded in real-world customer behavior.

For a deeper dive, statistical modeling offers a more nuanced approach. These models consider factors like seasonal variations, customer demographics, and the impact of promotional campaigns on redemption rates. Accurately recognizing revenue is crucial in this context. These models contribute to a more precise understanding of future redemption patterns.

Furthermore, segmenting customer data enhances the accuracy of breakage estimates. By grouping customers based on shared characteristics like buying frequency or demographics, businesses gain a more granular view of redemption behavior. This segmentation reveals valuable insights. For example, frequent buyers might redeem gift cards at a different rate than occasional shoppers. This nuanced understanding allows for more targeted analysis and refined breakage estimates, ultimately leading to more accurate financial reporting.

When to Recognize Revenue for Gift Card Breakage

Understanding when to recognize breakage revenue is crucial for accurate financial reporting. This isn't always straightforward, and miscalculations can lead to compliance issues. Let's break down the key factors that influence the timing of breakage revenue recognition.

Factors Influencing Revenue Recognition Timing

The biggest factor determining when you recognize breakage revenue is your expectation of receiving it. If you reasonably expect to receive the breakage amount—meaning you believe it's likely customers won't redeem the full value of their gift cards—you recognize the revenue gradually. On the other hand, if you don't expect to receive the breakage amount, you only recognize it when it becomes highly probable the remaining value won't be redeemed. This often involves analyzing historical data and customer behavior.

The Remote Method: When Redemption is Unlikely

The remote method is used only when a company anticipates zero breakage. This means if you determine a gift card is unlikely ever to be redeemed, you can recognize the revenue associated with that gift card immediately. This approach simplifies accounting but requires a high degree of certainty that the gift card will remain unused. For more information on revenue recognition, explore resources like KSM's insights on breakage revenue.

The Redemption Pattern Method: Proportional Recognition

The redemption pattern method offers a more nuanced approach. With this method, you recognize breakage income proportionally to the value of redeemed gift cards, based on historical redemption rates. This aligns revenue recognition with actual customer behavior, providing a more accurate financial picture. As customers redeem their gift cards, you recognize a portion of the potential breakage revenue. For a deeper dive into gift card revenue recognition, check out Leapfin's guide.

Choosing between these methods depends on your specific circumstances and predicted redemption patterns. Consider factors like your industry, customer behavior, and historical data to determine the most appropriate method. For complex scenarios or high-volume transactions, automated solutions can ensure accuracy and compliance. Companies like HubiFi offer specialized services in this area.

Understanding the Proportional Approach

For most businesses, the proportional approach is the standard for recognizing breakage revenue. This method, aligned with ASC 606 (Revenue Recognition), requires recognizing the revenue gradually over the gift card's expected lifespan. For example, if your historical data shows that customers typically redeem 80% of a gift card's value within a year, you'd recognize 80% of the potential breakage revenue within that timeframe. This approach relies heavily on accurate historical redemption rates. For more information, explore these gift card accounting insights.

Illustrative Journal Entries

Let's illustrate the journal entries related to gift card breakage with a practical example. Imagine your business sells a $100 gift card. Initially, you wouldn't recognize this as revenue. Instead, you'd record it as a liability (deferred revenue) because you owe the customer $100 worth of goods or services.

Journal Entry 1: Upon Gift Card Sale

  • Debit: Cash (+$100)
  • Credit: Deferred Revenue (+$100)

This entry reflects the increase in cash and the obligation to provide goods/services.

Now, let’s say the customer redeems $80 of the gift card. You would then recognize $80 as revenue.

Journal Entry 2: Upon Partial Redemption

  • Debit: Deferred Revenue (-$80)
  • Credit: Revenue (+$80)

This entry decreases the liability and recognizes the earned revenue.

Based on historical data, you estimate that the remaining $20 is unlikely to be redeemed. This is your breakage revenue. According to Baker Tilly's insights, you would then make the following entry:

Journal Entry 3: Recognizing Breakage Revenue

  • Debit: Deferred Revenue (-$20)
  • Credit: Breakage Revenue (+$20)

This final entry removes the remaining liability and recognizes the breakage as revenue. The timing of this entry depends on your breakage estimate, as explained in PwC's guidance. Regularly reviewing and refining your breakage estimation process is crucial for accurate financial reporting. For complex revenue recognition scenarios, consider automating the process with a solution like HubiFi.

Impact of Gift Card Breakage on Financials

Accurately accounting for gift card breakage has a ripple effect across your entire financial landscape. Getting it right is essential for preventing misstatements, staying compliant, and avoiding potential penalties. It also significantly influences how investors and lenders perceive your business's financial health. Sound gift card accounting practices are crucial for maintaining a positive financial outlook. By implementing a robust revenue recognition strategy, you can present a clearer, more accurate picture of your financial performance. For tailored solutions to manage your revenue recognition, consider scheduling a demo with HubiFi.

Legal and Regulatory Considerations for Breakage

Gift card breakage might seem like found money, but don't get too excited. There are legal and regulatory hurdles to clear before you can count it as revenue. Understanding these nuances is key to staying compliant and avoiding potential headaches.

Navigating State Laws on Gift Card Breakage

State laws regarding gift cards and breakage can feel like a maze. Each state has its own set of rules about everything from expiration dates (or lack thereof) to how unclaimed funds are handled. This patchwork of regulations means businesses need to be extra diligent in understanding the specific requirements in every state where they operate. This can be tricky for businesses operating across state lines, adding complexity to your revenue recognition process. For example, some states consider unredeemed gift card balances as abandoned property after a certain period, while others don't. Staying on top of these varying rules is crucial for accurate accounting and compliance.

Escheatment Rules and Compliance

Escheatment is a key factor in managing gift card breakage. It refers to the process of turning over unclaimed funds to the state. Escheatment laws vary by state, so you'll need to know the rules everywhere you do business. This includes understanding which types of gift cards are subject to escheatment, the timeframe involved, and the reporting requirements. Failing to comply with these rules can lead to penalties and legal issues. Gift cards subject to escheatment shouldn't be included in your breakage calculations, as that money is legally destined for the state, not your business. This is where having solid processes and a clear understanding of your obligations can protect your business. Consider consulting with legal counsel specializing in escheatment to ensure you're following the appropriate procedures in each state.

Impact of Escheatment on Breakage Revenue

Escheatment plays a critical role in managing gift card breakage revenue. It's the process of transferring unclaimed funds to the state. Understanding escheatment laws is crucial, especially for businesses operating across multiple states. These laws vary by state, impacting which gift cards are subject to escheatment, the timelines involved, and the required reporting. For a deeper dive into the legal and regulatory considerations surrounding breakage, check out this helpful resource.

Critically, gift cards subject to escheatment shouldn’t be included in your breakage revenue calculations. This money is legally obligated to the state, not your business. Overlooking this can lead to inaccurate financial reporting and potential compliance issues. Solid processes and a clear understanding of your escheatment obligations are essential. Consulting with legal counsel specializing in escheatment can provide additional expertise and ensure accurate revenue recognition.

Challenges in Recognizing Breakage Revenue

Accurately recognizing breakage revenue presents several challenges. It requires careful planning, consistent monitoring, and a deep understanding of accounting principles and consumer behavior. Let's explore some key hurdles businesses face:

Ensuring Accurate Breakage Estimates

Getting your breakage estimate right is crucial for compliance and reliable financial reporting. This estimate should be updated regularly, as noted by Paytronix. One challenge lies in adhering to accounting standards like ASC 606, which mandates a consistent and defensible estimation methodology. This often involves analyzing historical redemption rates and making assumptions about future customer behavior. Overly optimistic or pessimistic estimates can distort your financial statements and lead to compliance issues.

Adapting to Changing Consumer Behavior

Consumer behavior is rarely static. Shifts in spending habits, economic conditions, and even seasonal trends can impact how and when customers redeem gift cards. Companies need to stay agile and regularly review their breakage estimates to ensure they reflect current market realities, as PwC points out. This can be tricky, as predicting future behavior is an imperfect science. Accurate data tracking is essential for making informed adjustments to your estimates.

What to Do with Limited Historical Data

For newer businesses or those launching new gift card programs, limited historical data can make estimating breakage difficult. Baker Tilly suggests a 5–10% starting breakage rate in these situations. However, relying on industry benchmarks alone may not accurately reflect your specific customer base. Building a robust data set takes time, and in the meantime, companies must find ways to create reasonable estimates while acknowledging the inherent uncertainty. This might involve using statistical modeling or incorporating data from comparable businesses.

Best Practices for Gift Card Programs

Smart gift card management involves more than just selling and redeeming. It requires a strategic approach to maximize benefits and maintain compliance. Here are some best practices to keep your gift card program running smoothly:

Regularly Review and Update Breakage Estimates

Accurately estimating breakage is crucial for reliable financial reporting. Regularly review and update your breakage estimates, especially as consumer behavior shifts or as you gather more sales data. Don't just set it and forget it—consistent refinement ensures your financial records reflect the most accurate view of your gift card liabilities and revenue.

Track and Analyze Gift Card Data Effectively

Detailed tracking is the backbone of any successful gift card program. Keep meticulous records of gift card sales, redemptions, and breakage amounts. This not only simplifies reconciliation but also provides valuable insights into customer behavior. Leveraging automated revenue recognition software and integrations with your existing accounting systems can streamline this process and minimize errors.

Clear Communication with Customers

Transparency builds trust. Clearly communicate all gift card terms and conditions to your customers, including any fees, expiration dates, and dormancy policies. This not only fosters positive customer relationships but also helps you avoid potential legal issues. Open communication ensures everyone is on the same page and helps maintain a smooth, hassle-free experience for your customers.

Tips for Consumers to Avoid Breakage

While businesses grapple with the accounting side of gift card breakage, consumers also have a role to play. After all, it's your money! Here are a few simple strategies to ensure you get the most value from your gift cards:

Use Gift Cards Promptly: The best way to avoid breakage is to use your gift cards as soon as possible. Prioritize using the most restrictive payment methods first (gift cards before cash, for example), as suggested by Forbes Advisor.

Keep Track of Expiration Dates and Fees: Gift cards sometimes come with expiration dates or fees. Understanding these details is crucial for planning your purchases. Paytronix emphasizes the importance of knowing the terms and conditions.

Organize and Monitor Your Gift Cards: Keep a list of your gift cards, their balances, and their expiration dates. This simple step can help you stay organized and avoid letting those gift cards go unused. Forbes Advisor offers additional tips for managing your gift cards.

Consider Using Gift Cards for Everyday Purchases: Don't just save gift cards for special occasions. Using them for everyday expenses, like groceries or gas, is a practical way to ensure they get used. Paytronix suggests incorporating gift cards into your regular spending.

Be Mindful of Small Balances: Those small, leftover balances can add up! Don't let them go to waste. If you have a card with a few dollars left, use it for a small purchase or combine it with another payment method. Baker Tilly highlights the importance of being mindful of even small balances.

Tools and Tech for Breakage Management

Managing gift card breakage effectively requires accurate tracking, analysis, and compliance with accounting standards. The right tools and technologies can simplify these processes, saving you time and minimizing errors.

Automating Breakage Management with Software

Automated revenue recognition software streamlines the complexities of managing gift card transactions. These tools accurately track gift card sales, redemptions, and breakage, ensuring proper revenue recognition and compliance with accounting standards like ASC 606. This automation not only saves time but also ensures your financial statements comply with Generally Accepted Accounting Principles (GAAP), as highlighted in HubiFi's guide on GAAP accounting for gift cards. Software like this automates much of the data collection and analysis required for accurate revenue recognition, freeing up your team to focus on other tasks. For more on how software helps manage the complexities of gift card accounting, check out this practical guide on journal entries for gift cards. Features like automated reporting and dashboards provide real-time visibility into key metrics, allowing you to make informed decisions about your gift card program. Consider exploring HubiFi's automated solutions for more information on streamlining your revenue recognition process. Schedule a demo to see how HubiFi can help your business.

HubiFi's Automated Revenue Recognition Solutions

Managing gift card breakage and its associated revenue recognition can be complex. Thankfully, automated solutions can simplify these processes, ensuring accuracy and compliance. HubiFi offers tailored solutions designed to streamline revenue recognition for high-volume businesses, helping you navigate the intricacies of ASC 606 and other relevant accounting standards.

Our platform integrates disparate data sources, providing a unified view of your gift card program performance and automating the recognition of breakage revenue. This not only saves your team valuable time but also reduces the risk of errors and ensures your financial reporting is always audit-ready. HubiFi integrates with popular accounting software, ERPs, and CRMs, further enhancing efficiency and data visibility across your organization.

To learn more about how HubiFi can transform your revenue recognition process, schedule a demo today.

Integrating with Existing Systems

Beyond standalone software, integrating your gift card program with your existing accounting and business systems is crucial for a seamless workflow. Dedicated accounting software and system integrations automate tracking, minimize errors, and simplify reconciliation, as discussed in HubiFi's ultimate guide to gift card liability accounting. Connecting your gift card platform with your CRM and ERP systems allows for a holistic view of your customer data and financial performance. This integration ensures data consistency across all platforms and reduces manual data entry, minimizing the risk of errors. Platforms like PassKit offer dashboards that track gift card activity, and can often integrate with existing systems for streamlined management. For more on how HubiFi integrates with various platforms, visit our integrations page.

Optimizing Your Revenue Recognition Strategy

Optimizing your revenue recognition strategy for gift card breakage involves a careful balance between adhering to accounting standards and maximizing your financial outcomes. This requires a proactive approach to understanding and adapt to evolving market trends and consumer behavior.

Balancing Compliance and Financial Goals

Accurately recognizing revenue from gift card breakage is crucial for strong financial reporting. This ensures compliance with standards like ASC 606 and provides a clearer picture of your financial performance to inform strategic decisions. Automated revenue recognition software streamlines tracking gift card sales, redemptions, and breakage. This automation ensures compliance and frees up your team for higher-level tasks. For a deeper dive into gift card accounting, check out our guide on journal entries for gift cards and our guide to gift card liability accounting. Prioritizing accurate accounting practices sets the stage for sustainable financial growth.

Adapting to Market Trends

Staying ahead of market trends is essential for optimizing your revenue recognition strategy. Modern accounting software automates data collection and analysis, ensuring your financial statements comply with Generally Accepted Accounting Principles (GAAP). This efficiency saves time and minimizes errors, leading to more accurate revenue recognition. Leveraging tools like gift card tracking software offers additional advantages, including improved efficiency in managing gift card sales and automating tasks. PassKit's dashboard demonstrates how these tools simplify tracking and management. By embracing these technological advancements, you can adapt to changing consumer behavior and ensure your revenue recognition strategy remains effective and compliant.

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Frequently Asked Questions

What exactly is gift card breakage? Gift card breakage is the value of gift cards that a business predicts will never be redeemed. This prediction isn't random; it's a calculated estimate based on historical data and trends, and it's considered revenue for the business. It's important to remember that breakage isn't just about lost cards; it also includes cards with small, unused balances that are unlikely to be spent.

How does gift card breakage affect my business's finances? Gift card breakage directly impacts your revenue recognition. Understanding how to account for it is crucial for accurate financial reporting and compliance with standards like ASC 606. Miscalculating breakage can lead to financial misstatements and potential legal issues. It also affects how investors and lenders view your financial health.

How can I accurately estimate gift card breakage? Estimating breakage involves analyzing historical redemption rates and using statistical modeling to predict future trends. You can refine these estimates by segmenting your customer data and considering factors like seasonal trends and promotional campaigns. Regularly updating your estimates is key for maintaining accuracy.

When should I recognize breakage revenue? The timing depends on your expectation of receiving the breakage amount. If you reasonably expect to receive it, you recognize the revenue gradually as gift cards are redeemed or expire. If you don't expect to receive it, you only recognize it when it becomes highly probable the remaining value won't be redeemed. This often involves analyzing historical data and customer behavior.

Are there any legal considerations regarding gift card breakage? Yes, state and local laws regarding unused gift card balances vary significantly. Some states have escheatment laws, requiring businesses to turn over unclaimed funds after a certain period. Understanding these regulations is crucial for compliance and avoiding penalties. It's essential to research the specific rules in each state where you operate.

Jason Berwanger

Former Root, EVP of Finance/Data at multiple FinTech startups

Jason Kyle Berwanger: An accomplished two-time entrepreneur, polyglot in finance, data & tech with 15 years of expertise. Builder, practitioner, leader—pioneering multiple ERP implementations and data solutions. Catalyst behind a 6% gross margin improvement with a sub-90-day IPO at Root insurance, powered by his vision & platform. Having held virtually every role from accountant to finance systems to finance exec, he brings a rare and noteworthy perspective in rethinking the finance tooling landscape.