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Comment by xtiansimon | Hacker News Reader

> “Your comment is an attempt at covering up fraud.”

I’m sorry, but you’re wrong about the facts. A gift certificate is a business liability under GAAP. And you’re not required to hold that liability forever.

FASB ASC 606 (Revenue from Contracts with Customers)

What’s more, Federal Law gives you only 5 years, but states may have additional protections,

“Under the law, a gift card cannot expire until at least five years from the date it was activated. The law also places general limitations on fees. For instance, the card issuer cannot charge a dormancy or inactivity fee on a gift card unless there has been no activity for one year and the card clearly states its policy toward that fee.”

The Credit Card Accountability Responsibility and Disclosure (Credit CARD, 2009)

https://www.fdic.gov/consumers/consumer/news/december2019.ht...

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There are several states where they are in fact required to hold the liability forever.

https://www.ncsl.org/financial-services/gift-cards-and-gift-...

> A gift certificate is a business liability under GAAP. And you’re not required to hold that liability forever.

And an expectation that the liabilities will never be called is an offsetting asset. It never offsets to quite zero, but over time it gets pretty darn close.

> A gift certificate is a business liability

You say that, but you haven't explained how it is a liability, and I consider it debatable. In practice, there is a near-zero risk to a large firm in a statistical sense if the firm caps the max amount held per user to say $1000 or whatever the acceptable limit is. It's not as if millions of users are suddenly going to exercise their balances all at once unless the firm is going out of business anyway.

Cloud computing firms even allow me to keep tens of thousands of dollars in my account balance, with no expiration, which helps me ensure that my cloud services will keep running for years if not decades. There is just no strong case for OpenAI expiring unused balances after one year. In my prior comment, I already named various large firms that NEVER expire gift card balances.

The reputation loss from an expired balance is vastly more consequential. Thinking solely from an accounting pov is absurd.

> “You say that, but you haven't explained how it is a liability, and I consider it debatable.”

I gave chapter and verse.

But let me try to help with the intuition. It’s about accounting. That’s all. Not your intuition. Not my preference. Ready?

Record. It’s the agreed upon rules for how some named monetary _thing_, which is constant flow and here defined, can be said to have a value x at time t. Gift card is a liability until used when it is recognized as revenue. Period. Full stop. End recording.

All the laws, maybe your law of how long they should keep the liability, are down stream from this. Everything else is chaos and confusion.

> Gift card is a liability until used

It's your biased interpretation that it's a liability. A clever firm may use a safe fraction of it to collect interest via a bank or directly via treasuries. This turns your logic on its head. The longer the gift card stays unused, the more revenue it generates via interest. Just enough needs to be kept as cash to fund customer expenses for the next two quarters.

You are arguing about accounting jargon. The card has to be tracked, the entries that track it fall under the label "liability".

The issue is that the author is using it as an excuse to justify stealing unspent customer funds after one year. It's not an appropriate excuse.

> “…stealing unspent customer funds after one year.”

There’s our common ground! The common sense question: why is 1 year legal when there is a federal law saying it’s must be 5 years?

The funds must ideally last forever for the life of the firm. I wouldn't even buy a gift card if it going to expire in five years.

Amazon is another prominent example. It gift card in the US never expires and has no fee. It's a good place for stashing funds. Do you think Amazon doesn't have accountants?

For logical reasons I have noted before, there is no unmanageable risk to any sizable firm with it.

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