Best Buy 2016 Annual Report Download - page 58

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50
Gift Card Breakage – We sell gift cards to customers in our retail stores, through our websites and through select third parties.
A liability is initially established for the value of the gift card when sold. We recognize revenue from gift cards when the card is
redeemed by the customer. For unredeemed gift cards we recognize breakage when the likelihood of the gift card being
redeemed by the customer is deemed remote and we determine that we do not have a legal obligation to remit the value of the
unredeemed gift cards to a relevant jurisdiction. We determine the breakage rate based on historical redemption patterns, which
show that after 24 months, we can reasonably estimate breakage. We do not believe there is a reasonable likelihood that there
will be a material change in the future estimates or assumptions we use to record breakage. However, if actual results are not
consistent with our estimates or assumptions, we may be exposed to an impairment charge that could be material.
Customer Loyalty Programs – We have customer loyalty programs which allow members to earn points for each purchase
completed or when using our co-branded credit cards. Points earned enable members to receive a certificate that may be
redeemed on future purchases. The value of points earned by our loyalty program members is included in accrued liabilities and
recorded as a reduction in revenue at the time the points are earned, based on the value of points that are projected to be
redeemed. Our estimate of the amount and timing of redemptions of certificates is based primarily on historical data. A 10%
difference in our customer loyalty point liability at January 30, 2016, would have affected net earnings by approximately $13
million in fiscal 2016.
We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions of
our revenue recognition critical accounting estimates. However, if actual results are not consistent with our estimates or
assumptions, we may be exposed to losses or gains that could be material.
New Accounting Pronouncements
For a description of new applicable accounting pronouncements, see Note 1, Summary of Significant Accounting Policies, of
the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data, of this
Annual Report on Form 10-K.