preview

Prepaid Stored Value Cards

Better Essays
Introduction
Attention has been centered on making the different accounting operations more effective regarding the time consumed in the carrying out of various functions and their cost related issues. Stored-value cards are some of the widely used means of purchasing goods by different consumers, they represent a specific association between the entities who issue the cards, the customers who redeem them, and the third-party merchants who act as the middle man. These cards are redeemed for the different goods and services and various arguments exist showing the cards have both financial and nonfinancial liabilities in the process of their use. These arguments have made it necessary for the FASB to analyze the revenues from contracts and make
…show more content…
The changes are geared towards increasing the effectiveness of the different processes and reducing the related cost functions of the organization. The reasons for my support include the entities’ need to recognize when its revenues are made, this then makes it possible for the entity track the whole process as each aspect of the transaction is carried out. make it possible so it will be possible for the entity to track the whole process as the organization carries out the different functions. There also exists, the need to make it possible to deduct the sales tax and other taxes from the consideration that is also the price of the good or the service. Therefore, this paper will explore a discussion of the criteria of accounting for those contracts or liabilities that do not meet the set-out criteria, how the taxes are deducted from the different customers, the making of noncash considerations, and complete contracts at…show more content…
The cards are therefore the basis on which the different individuals enter contracts to purchase the different consumer goods and services. The consumers can redeem the pre-paid cards for the different consumer goods and services. The process is made easy by the consumers entering into contracts with the other third party players. The efforts have been geared towards the de-recognition and the ultimate undoing of the cards that are supposed to represent to a certain degree the financial liability between the entity that provides the cards and the customers before the redeeming of such cards. The set of liabilities include both the financial and nonfinancial liabilities.
The current accounting principles of the GAAP requires that if an organization realizes the presence of either financial or nonfinancial liabilities, it is supposed to apply the derecognition guidance. The process applies the required and recognized principles of the GAAP. De-recognition is, however, limited to the period when the customer redeems the card, or in the case when the card expires or when it is subjected to the rules of property. The below analysis gives the insight into the reasons as to why the breakage in de-recognition and extinguishment will be
Get Access