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.
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.
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?
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)
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.
Why would you comment on something you know nothing about?
https://blog.leapfin.com/how-to-properly-recognize-gift-card-revenue
Ha, completely forgot about this.
You should read that article carefully though. They even outline why this is a money maker later:
So, uhhh, I guess I’d ask, why would you comment on something about which you know nothing?
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)