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LO1 P5-53. Analyzing and Interpreting Revenue Recognition Policies and Adoption of the New Standard BKS) Barnes & Noble provides the following explanation of its gift
LO1 P5-53. Analyzing and Interpreting Revenue Recognition Policies and Adoption of the New Standard BKS) Barnes & Noble provides the following explanation of its gift card liabilities. Gift Cards The Company sells gift cards, which can be used in its stores, on www.barnesandnoble .com, on NOOK devices and at Barnes & Noble Education, Inc. (B&N Education) stores. Upon the purchase of a gift card, a liability is established for its cash value. Revenue associated with gift cards is deferred until redemption of the gift card. Over time, a portion of the gift cards issued is typically not redeemed. This is referred to as gift card breakage. Effective April 29, 2018, the Company adopted Topic 606. The adoption of Topic 606 resulted in changes in the timing of revenue recognition for gift card breakage. The Company estimates the portion of the gift card liability for which the likelihood of redemption is remote based upon the Company's historical re- demption patterns. Prior to adoption of Topic 606, the Company recorded this amount in revenue on a straight-line basis over a 12-month period beginning in the 13th month after the month the gift card was originally sold. Upon adoption, the Company now recognizes estimated gift card continued
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