Breakage
Categories: Company Management, Ethics/Morals, Accounting
Free money (kinda) for retailers coming from gift cards or other prepaid items that never get redeemed.
This past April, Cole’s mother bought him a $100 Toys R’ Us gift card for his birthday. Cole planned to use it to buy his sister, Kailee, a gift for her birthday in September. But now that the company has gone out of business and closed all of its stores, Toys R’ Us will reap the benefit of the breakage from the $100 of revenue that will never be redeemed for inventory (not to mention the breakage of Kailee’s heart when she gets nothing for her birthday).
#ThanksGeoffrey.
