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Accounting Standards

home Local Compliance InformationAccounting Standards
Subject
Accounting for Gift Certificates
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Date
2018-05-29
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Translatedby: Jooyeon Han

1. Considered as Cash Equivalents (QuickAssets)

This method treats gift certificate asinvesting, in order to operate cash in the short term and earn profit.Therefore, gift certificate considered to be cash equivalents with similarliquidity.

On accounting standpoint,

Easy to convert to cashwithout big transaction cost

As a securities andshort-term financial instruments in which the risk of value volatility due tointerest rate fluctuations is not important

The maturity (or redemptiondate) at the time of acquisition comes within three months

 

2. Considered as AccountReceivable (Quick Assets)

In case it accrued from company's mainbusiness activity of revenue generating such as selling goods and services. Inother words, when it relates to the sale of goods or services, which isordinary business activities for business purpose.

3. Considered as Short-term FinancialInstruments

Considered as standardized instrument byfinancial institutions such as periodic deposits, periodic installment savings,deposits with limited use which is owned for short-term management or maturitycomes within a year.

It cannot be considered as a financialinstitution or other standardized product.

 

4. Considered as a Short-term TradingSecurities

As securities acquired principally for the purpose ofshort-term trading gain

Active and frequent buying and selling

The gift certificate is circulated withdiscounted price, but buy or sell activity cannot be considered to befrequently performed.

 

5. Considered as Held-to-MaturitySecurities (Investment Assets)

As a debt securities with fixed maturity, whenrepayment amount is fixed, or would-be fixed and it there is an activeintention and capability to hold until maturities.

Even if there is a maturity date, repaymentamount is not fixed or there is no active intention of holding the assets.

6. Considered as Available-for-SaleSecurities (Investment assets)

According to accounting standards, acquiredsecurities are classified as trading securities, available-for-sale securitiesand hold-to-maturity securities based on acquisition purpose and abilities.Available-for-sale securities refer to securities that are not classified asavailable-for-sale securities or trading securities (Excluding equity-methodinvestment, options and derivatives).

Securities referred to in Article 8 of theaccounting standards, it refers to the security that represents propertyrights. In some cases, it is issued as materialized form or it can be justregistered on booking. Securities are divided into proper par value units andcan be traded or invested in the market. Securities is an inclusive term forequity and debt securities.

However, aforementioned standard does notinclude ware house securities, cargo exchange notes and bill-of-landing.(Article 8 of K-IFRS)

 

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