The $1 Billion Gift Card

Have you ever purchased a gift card at Starbucks? Millions of people around the world have.

So many in fact that Starbucks now owes its customers over $1 Billion (US) in espressos, frappuccinos and, of course Pumpkin Spice Lattes. And the number is growing daily.

While that anecdote may seem a little whimsical, as Everett Dirksen once said, "A billion here and a billion there and pretty soon you're talking about real money." How does Starbucks account for that enormous figure?

The original Starbucks location at 1912 Pike Place in Seattle.

As far as I know, no one from their Accounting Department has attended one of our workshops - yet! 

But they know–as we teach–that this enormous figure on the balance sheet shows up as a liability called, ironically, Deferred Revenue, with a balancing figure to Cash in Assets being the money received.

Actual revenue is not recognized until the card holder purchases something. Which gives us another good example where revenue most certainly does not mean monies received!

What's that you say? Double-shot vanilla half-caf espresso for Peter? Yes, that's mine.

Regards, Peter