Hello, We run an ecommerce website. Our gift card programme is managed by a 3rd party Gift Card provider. As per the the Terms and Conditions of the programme, we are selling the gift cards on behalf of the third party gift card programme. When we receive the funds we transfer them to the 3rd party gift card provider and they manage the redemption of the gift cards. Once the gift cards expire (approximately 4 years) they send the funds back to us and we recognise them as revenue at this point. So here are some facts: - We sell the gift cards on our website - The T&Cs say that the 3rd party is responsible for the cards - We are the recipient of the cash after expiry So some questions: - Is it correct accounting treatment that this gift card liability is moved off our balance sheet and only recognised when the gift cards expire? - Is there any obligation to recognise the gift card liability on our balance sheet as we are selling the gift cards on our website? Thanks for any insight here!
Accounting for Gift cards that are managed by a 3rd party
Answers
Actually it really depends upon the agreement between the 3rd part and the owner.
But in our practice, It would be the liability of the owner since the 3rd party is just there to sell the gift card. It would not be his fault if the gift cards were not sold before the expiry date.
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Accounting