Gap (GPS)

Unredeemed Gift Cards

Upon the purchase of a gift card or issuance of a gift certificate, a liability is established for the cash value of the gift card or gift certificate. The liability is relieved and income is recorded as net sales upon redemption. Over time, some portion of the gift cards issued is not redeemed. This amount is recorded as other income, which is a component of operating expenses, when it can be determined that the likelihood of the gift card being redeemed is remote and there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions. Our gift cards and gift certificates do not have expiration dates. In the second quarter of 2006, we changed our estimate of the elapsed time for recording income associated with unredeemed gift cards to three years from our prior estimate of five years and, as a result, recorded $31 million of other income in fiscal 2006.

Unredeemed Gift Cards

Upon the
purchase of a gift card or issuance of a gift certificate, a liability is established for the cash value of the gift card or gift certificate. The liability is relieved and income is recorded as net sales upon redemption. Over time, some portion of
the gift cards issued is not redeemed. This amount is recorded as other income, which is a component of operating expenses, when it can be determined that the likelihood of the gift card being redeemed is remote and there is no legal obligation to
remit the unredeemed gift cards to relevant jurisdictions. Our gift cards and gift certificates do not have expiration dates. In the second quarter of 2006, we changed our estimate of the elapsed time for recording income associated with unredeemed
gift cards to three years from our prior estimate of five years and, as a result, recorded $31 million of other income in fiscal 2006.