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March 19 — A standing task force of the Financial Accounting Standards Board agreed to a proposal on how prepaid stored-value cards—such as cards redeemable for goods, services or cash—should be reported in financial statements.
At issue in the proposed guidance of FASB's Emerging Issues Task Force (EITF Issue No. 15-B) is the treatment of the liability that exists between the issuer of the card and the consumer before the card is redeemed.
How that obligation is accounted for is especially important when “breakage” occurs and a liability is taken off the books. Breakage is the financial term for the recognition of revenue realized by a retailer when gift cards aren't redeemed or they expire, for example.
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