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  Reply     Reply to Comment o COLLAPSE SUBDISCUSSION     Timothy Walker
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Timothy Walker Aug 2, 2018Aug 2 at 10:23pm Manage Discussion Entry Hi Travis, Good job on your posting.  You seem to have a clear understanding that breakage is the unredeemed portion of a gift card.  However, I am not sure you actually  understand how that is a problem for companies, from what you wrote? A gift card represents unearned revenue or an unpaid liability to the company.  That  debt weighs against the company, so if the right to collect that debt is never going to  be utilized by the cardholder, the issuer could end up carrying that unpaid obligation  on their balance sheets for years, even though it no longer represents  a legitimate expense to the company.  That is why standards and methods for  derecognizing breakage were created.  To allow issues to rid themselves of stale  liabilities and instead recognize those amounts as the revenue they have become  (Gordon, Raedy, & Sannella, 2016). Tim                                                          Reference Gordon, E. A., Raedy, J. S., & Sannella, A. J. (2016). Intermediate accounting. 
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