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Gift Card Breakage Revenue Calculator (ASC 606-10-55-48)

What does this come to under the current IRS rules?

Breakage recognized in proportion to the redemption pattern, cumulative revenue and the remaining contract liability.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Revenue this period
$150,000
Redemptions plus proportional breakage
Breakage recognized to date
$24,000
Redemption pattern (share of expected redemptions)
60.00%
Drawn to one scale
Revenue this period$150,000
Breakage recognized to date$24,000
Cumulative revenue to date$300,000
Contract liability remaining$200,000
All results
MeasureResult
Revenue this period$150,000
Breakage recognized to date$24,000
Redemption pattern (share of expected redemptions)60.00%
Cumulative revenue to date$300,000
Contract liability remaining$200,000
How this was worked out
Work shownrecomputed as you type
Expected redemptions = sold x (1 - breakage rate)
Pattern = redemptions / expected redemptions
Breakage to date = pattern x sold x breakage rate

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Expected redemptions = sold x (1 - breakage rate)
  • Pattern = redemptions / expected redemptions
  • Breakage to date = pattern x sold x breakage rate

How it works

ASC 606-10-55-48 recognizes expected breakage as revenue in proportion to the pattern of rights exercised by the customer when the entity expects to be entitled to breakage. If it does not expect breakage, it recognizes breakage when the likelihood of the customer exercising its rights becomes remote.

Unclaimed property laws that require remittance of unredeemed balances to a state take that portion out of breakage: it stays a liability.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Is breakage subject to the constraint?

Yes. ASC 606-10-55-48 points to the constraint guidance when estimating whether the entity expects breakage.

What if escheat laws apply?

Amounts payable to a government are not revenue. Exclude them from the breakage rate.

Can the cumulative breakage reverse?

A change in the expected breakage rate is a change in estimate with a cumulative catch-up.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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