Please identify the issue, the current accounting, the proposed accounting, and whether or not you agree with the proposed accounting is an improvement in GAAP.
Your evaluation should consider how a liability related to the vendor’s obligation to honor the card has been extinguished and consideration of the related State escheat laws.
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According to Card Compliant the prepaid card industry is valued at “$500B+” (Card Compliant, 2012). While many Americans purchase and redeem the cards for their full value, some do not. Unredeemed amounts from prepaid cards are considered breakage. Sellers of prepaid cards have been applying differing practices to derecognizing the liability associated with this breakage (FASB, 2015). Because of these differing practices FASB has released an exposure draft of proposed updates to Subtopic 405-20 – Liabilities – Extinguishment of Liabilities....
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