Promotion math
Gift card breakage.
Enter gift cards sold, how much has been redeemed and the share you expect never to be redeemed. See breakage recognised so far, breakage still to come and the liability that remains.
Breakage recognised = expected breakage x redeemed / expected total redemptions. The example below recognises $5,217.39 after 60% redemption and leaves a $34,782.61 liability.
Your numbers
Result
Worked example
A shop sells $100,000 of gift cards in a month and expects 8% of them, $8,000, never to be redeemed, so $92,000 should eventually be spent. So far $60,000 has been redeemed, 65.22% of the $92,000 expected. Recognising breakage in step with redemptions gives $8,000 x 60,000 / 92,000 = $5,217.39 so far and $2,782.61 still to come. The unredeemed balance is $40,000, and after the breakage recognised the liability is $34,782.61. That equals the $32,000 still expected to be redeemed plus the $2,782.61 of breakage not yet recognised.
How it works
Expected breakage = cards sold x expected breakage rate. Expected total redemptions is the rest of the cohort. The rate must come from your own history for cards of the same kind, because a promotional card behaves differently from one bought as a gift.
Breakage recognised = expected breakage x redeemed to date / expected total redemptions. This is the proportional approach in IFRS 15: when you expect to keep part of the money, you recognise that part as revenue in line with the pattern of redemptions, instead of all at once at expiry.
Remaining liability = unredeemed balance - breakage recognised. It is what you still owe in goods or services, plus breakage you have not yet recognised.
Rules limit what you can do. In Ontario a gift card cannot have an expiry date and fees are restricted. In the US federal rules require that funds last at least five years from issue or last load. That makes breakage slow, so enter a low rate if your cards never expire, and ask your accountant about unclaimed property rules where you operate.
Sources
Retrieved 2026-10. The formulas are arithmetic on your inputs; the sources below are the rules and standards this page refers to.
- IFRS 15 Revenue from Contracts with Customers (IFRS Foundation): paragraphs B44 to B47 cover customers' unexercised rights, including gift cards, and say expected breakage is recognised in proportion to the pattern of rights exercised.
- Ontario Regulation 17/05 under the Consumer Protection Act, 2002: sections 25.3 and 25.4 on gift cards say there are no expiry dates and limit fees.
- 12 CFR 1005.20, Requirements for gift cards and gift certificates (Regulation E): expiration and dormancy, inactivity and service fee limits for gift cards in the US, including the five-year minimum.
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FAQ
What is gift card breakage?
It is the part of gift card value that is never redeemed. A seller can recognise it as revenue only when it expects to keep it and has no obligation to remit it elsewhere.
Can I count all breakage as soon as the cards are sold?
Not under the proportional approach in IFRS 15. You recognise expected breakage as cards are redeemed, so the amount builds up with redemptions.
Why is my breakage rate low if cards never expire?
Because cards that cannot expire keep being redeemed for years. Ontario forbids expiry dates and US federal rules require at least five years, so a conservative rate is realistic.
What about unclaimed property laws?
Some jurisdictions treat unredeemed balances as unclaimed property that must be reported or remitted. This tool does not model that, so check the rules where your customers live.