The Development of Reporting for Gift Card Breakage

• In Event: Session B: Forensics & Accounting

Abstract

This study examines the policy and disclosure choices made by retail firms regarding gift cards and gift card breakage and provides evidence on how the accounting in this area has developed over time without specific authoritative guidance. We find that firms exhibit a wide range of accounting and reporting choices with significant increases in the quantity and detail of disclosure over time (even when the amounts in question are described as immaterial). Firms with specific disclosure patterns in 2005 were more likely to receive a comment letter from the SEC regarding gift card policies. Those comment firms were then incrementally more likely to add specific gift card disclosures to future filings. Firms first recognizing breakage in 2006 or 2007 (after the wave of gift card related comment letters) also provided significantly more detail on their breakage policies than earlier adopters.

Authors

• Karen M Hennes, University of Oklahoma

• Kristy Schenck, Pennsylvania State University