Work out gift card liability instantly with clear inputs, formula shown and shareable results.
Gift cards create a deferred revenue liability until redeemed. Breakage — the portion expected never to be used — is recognised progressively as cards age, because non-redemption only becomes probable with time. This model releases it linearly over a 24-month observation horizon.
Outstanding balance
Outstanding = Cards issued - Value redeemed
Breakage recognisable
Recognisable = Expected breakage x min(1, Months since issue / 24)
Carrying liability
Liability = Outstanding balance - Breakage recognisable
When it becomes probable that the card will not be redeemed, based on historical patterns, and where local law does not require indefinite honouring.
Yes. Some jurisdictions require unredeemed balances to be remitted to the state, which removes breakage as an earnings item entirely.