Stored-Value Card Issuers Would Get Accounting Clarity Under FASB Proposal

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April 30 — Banks and other issuers of certain prepaid stored-value cards would see a clearer accounting path and an easing of restrictions on when associated liabilities would be taken off the books if the cards aren't used under a proposal issued by accounting rulemakers.

The Financial Accounting Standards Board addresses the topic of recognizing “breakage” for the stored-value cards in a draft accounting standards update issued April 30. Breakage refers to the situation in which cards expire or aren't redeemed.

Under current accounting—ASC 405-20—liabilities stemming from breakage can be hung up on the balance sheet in perpetuity.