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Old 02-16-2011, 11:57 AM   #16
queentess
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Quote:
Originally Posted by bill_mchale View Post
Gift cards are kind of complicated. In one sense they are a liability, since they represent goods and services they have already received money for that they still have to provide. On the flip side, I remember reading something years ago that said that a company was not allowed to record a profit associated with a gift card until it had been spent. So Borders probably is hoping that lots of people who received gift cards for Christmas comes in and uses them.

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Bill
This is correct. Even if they have the cash in hand, they cannot record it as a revenue until the card is spent (which is why many cards have an expiration date). However, Borders is having a cash problem ("liquidity shortfall"), so even if people use their cards (which I did, in case they close the only Borders in my area) it doesn't really help them.
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