Accounting Choices in Gaming Loyalty Programs and Promotional Allowances

• In Event: Government/NPO and Other Accounting Issues

Abstract

The gaming industry in the United States may continue to grow as states search for alternative sources of revenue during tough economic times. This growth may be accompanied by an increased emphasis among standard-setters on decreasing the diversity in accounting techniques that has traditionally existed in the gaming industry. In the gaming industry, the dollar amounts associated with these topics can be significant. Thus, differences in accounting for them can produce significant effects on financial statement balances, including effects on net income.
Using a non-random sample of U.S. gaming firms, we provide empirical examples of this diversity in accounting procedures associated with the subjects of promotional allowances, loyalty points, and calculations of “breakage.” Breakage is the revenue gained from the expiration of unused loyalty point rewards or the non-redemption of outstanding gaming chips. While some firms disclosed that they make an estimate for breakage, no firms in our sample describe the actual formula they use to determine the amount of breakage.

Authors

• Gregory Gaynor, University of Baltimore

• Frederic Matthew Stiner, University of Baltimore