Every dollar of store credit on a customer account is a promise to deliver goods later. Finance carries it as a liability, and the accounting depends on where the credit came from: cashback earned on an order, a refund taken as credit, a goodwill gesture or a gift card the customer bought. For how cashback programs run, see what a cashback loyalty program is.
This guide, for finance teams at Shopify Plus and enterprise brands, covers ASC 606 and IFRS 15 from the standards and Big Four guides, Shopify's store credit reports, and the expiry and unclaimed property rules, all read on November 13, 2026.
TL;DR: Unspent store credit is a liability until it is spent, expires or is owed to a state. Under US GAAP (ASC 606), cashback earned with a sale is typically a material right: part of the sale's revenue is deferred until the credit is spent, and breakage, the credit never spent, is recognized in proportion to spending when you expect it, or when spending becomes remote; IFRS 15 works the same way. US federal law, California and Washington allow a disclosed expiry date on loyalty and promotional credit but limit expiry on value customers paid for, such as gift cards, so agree expiry with counsel. Smile is our pick for Shopify Plus brands that want cashback in their own name, set up by our team: Smile Cashback, in early access, holds credit through your return window, shrinks rewards with refunds and expires credit on your terms, with reminders. More Shopify Plus brands run loyalty on Smile than on any other platform (Store Leads, October 2026).
How to Account for Store Credit Liability by Type of Credit
Unspent store credit is a liability; Shopify's retailer guide calls it "a liability that stays on your books" (Shopify, March 2026). How it is measured and released depends on how it was issued:
| Type of credit | When it is issued | As it is spent or expires | Standard |
|---|---|---|---|
| Cashback earned on a purchase | Typically a material right: part of the order's revenue is allocated to the credit and deferred | Recognized as spent, with expected breakage built in; the rest at expiry or when spending becomes remote | ASC 606-10-55-41 to 55-45; IFRS 15 B39 to B43 |
| A refund issued as store credit | The return reverses the sale, as a cash refund would; the credit is a liability at full value | Recognized as spent; breakage in proportion to spending if expected, otherwise when remote | ASC 606-10-55-22 and 55-46 to 55-49; IFRS 15 B20 and B44 to B47 |
| Goodwill credit | No new sale: usually a price concession that reduces revenue when promised or, if meant to win a new order, accounted for when spent | Follows the treatment chosen at issue; agree it with your auditor | ASC 606-10-32-25 to 32-27 |
| A gift card the customer bought | A contract liability for the card's full value, with no revenue at sale | Recognized as spent; breakage in proportion to spending if expected, otherwise when remote | ASC 606-10-55-46 to 55-49; IFRS 15 B44 to B47 |
Typical treatment, from the standards, PwC's Viewpoint revenue guide (sections 4.6, 7.2 and 7.4, 2024 to 2025) and EY's retail Technical Line (April 23, 2024).
PwC's guide says a credit usable only on future purchases most likely represents a customer option, in effect a discount on a later purchase (PwC, July 2025). Cashback paid in cash, or in a form that works like cash, reduces the sale's price instead (PwC, September 2025). For the margin math against a code, see store credit vs discount codes.
Cashback Credit as a Material Right Under ASC 606
An option to buy later at a discount is a separate performance obligation when it gives the customer a material right they would not get without the purchase (ASC 606-10-55-42). EY counts vouchers and gift cards handed out with a purchase, and loyalty credits, among these options (EY, April 2024). Cashback earned on an order usually fits. Cashback liability accounting runs in three steps:
- Price the credit. Its standalone selling price is its value, less any discount the customer could get anyway, adjusted for the likelihood it will be spent (ASC 606-10-55-44).
- Split the order's price between the goods and the credit by their relative standalone selling prices.
- Defer the credit's share as a contract liability, and recognize it as credit is spent or when it expires.
| $520,000 of orders earn 5% cashback; you expect 80% of the credit to be spent | Calculation | Result |
|---|---|---|
| Credit issued | 5% of $520,000 | $26,000 |
| Standalone selling price of the credit | $26,000 × 80% | $20,800 |
| Revenue deferred at the sale | $520,000 × $20,800 ÷ $540,800 | $20,000 |
| Revenue recognized at the sale | $520,000 minus $20,000 | $500,000 |
| Customers spend $10,400, half the credit you expect | $20,000 × $10,400 ÷ $20,800 | $10,000 released to revenue |
| The other $10,400 is spent and $5,200 expires | The rest of the deferral | $20,000 released in all |
Illustrative, not a forecast. Assumes goods sold at their standalone selling price and no discount available without the credit; the method follows PwC's loyalty points examples RR 7-13 and RR 7-14.
Each period, update how much credit you expect to be spent and adjust the liability, but keep the standalone selling price set at the sale (PwC, September 2025). Loyalty points follow the same model; see what a loyalty program costs for points liability in a budget.
What Is Store Credit Breakage and When Is It Recognized?
Breakage is the share of a customer's prepaid rights that is never used: store credit, gift card balances or points that are never spent (IFRS 15 B45). The standards allow two patterns (ASC 606-10-55-48; IFRS 15 B46):
- Proportional: if you expect breakage, recognize it in proportion to the pattern of customer spending.
- Remote: if you don't, recognize the unspent balance when the chance of it being spent becomes remote.
| $10,000 of credit, 10% expected breakage, $4,500 spent so far | Proportional | Remote |
|---|---|---|
| Revenue so far | $5,000: $4,500 spent plus $500 of breakage | $4,500 |
| Liability left | $5,000 | $5,500 |
| The rest | Released as the other $4,500 is spent | Released when spending becomes remote, or at expiry |
Illustrative. $4,500 is half of the $9,000 you expect to be spent, so half of the $1,000 of breakage is recognized.
Whether you expect breakage is an estimate under the constraint on variable consideration: include only amounts unlikely to reverse (ASC 606-10-32-11 to 32-13). PwC adds three points (PwC, September 2025):
- No waiting for expiry. If you expect breakage, estimate it; recognizing it only as credit expires is not allowed.
- Update every period, and adjust the liability to match.
- Credit that never expires is recognized when spending becomes remote; a program with no history may expect none until its data supports an estimate.
To build the estimate, track credit by month of issue and the share spent in each month after; Shopify's Store credit transactions report holds that data. Never count as breakage what you must hand to a state: amounts owed under unclaimed property laws stay a liability (ASC 606-10-55-49; IFRS 15 B47).
IFRS 15 vs ASC 606 for Store Credit
The FASB and IASB wrote these requirements together, so IFRS 15 matches ASC 606 paragraph for paragraph:
| Topic | ASC 606 | IFRS 15 |
|---|---|---|
| Material rights | 606-10-55-41 to 55-45 | B39 to B43 |
| Breakage | 606-10-55-46 to 55-48 | B44 to B46 |
| Amounts owed to a government | 606-10-55-49 | B47 |
| Returns for a credit | 606-10-55-22 | B20 |
| Constraint on estimates | Significant reversal "probable" not to occur | "Highly probable" not to occur |
The one difference is a word. Because IFRS defines "probable" as more likely than not, the boards chose "highly probable" for IFRS and "probable" for US GAAP to reach the same meaning (IFRS 15 Basis for Conclusions, BC211).
Shopify Store Credit Reports for Finance Teams
Shopify's admin reports carry what finance needs (Shopify Help Center, November 13, 2026):
| Shopify report or setting | What it shows | Use it for |
|---|---|---|
| Outstanding store credit balance | Starting balance, credit issued, debited and expired, exchange rate impact and ending balance, by day and currency | The liability at any date |
| Store credit transactions | Every credit, debit and expiry, with the date, customer and source, such as the app or staff member that issued it | Reconciliation and breakage history |
| Payments reports | Store credit as its own payment provider, for example in Net payments by gateway | Credit spent, kept apart from cash |
| Expiry, set per issuance | An expiry date or none on each credit or refund to credit; no store-wide default; the credit expiring first is spent first | Your expiry policy, applied credit by credit |
Shopify's store credit help tells merchants to check local laws before setting expiry dates. Shopify's sales reports show the value of goods sold, not the money received, so credit spent counts as a payment, not a discount. Stores created on or after May 12, 2025 also pay third-party transaction fees on the part of an order paid with store credit.
Does Store Credit Expire? What the Law Allows
On Shopify, store credit expiration is optional: credit expires only if you set a date when you issue it. Whether you may set one depends on what the credit is and where your customers live:
| Rule | Value the customer paid for, such as gift cards | Loyalty and promotional credit | Source (read November 13, 2026) |
|---|---|---|---|
| US federal (Credit CARD Act of 2009) | No expiry within five years of issue or the last load; inactivity fees only after 12 months without use, at most one a month | Excluded, if disclosed as promotional, with its expiry date and any fees | 15 U.S.C. 1693l-1; 12 CFR 1005.20 |
| California | No expiry date or service fee; since April 1, 2026, a balance under $15 is paid in cash on request | May expire if given free and the date is printed in capital letters, at least 10-point type, on the front | Civil Code 1749.5, as amended by SB 22 (2025) |
| Washington | No expiry date, fee or dormancy charge; under $5 left is paid in cash on demand | May expire under an awards or loyalty program, with the date disclosed clearly | RCW 19.240.020 and 19.240.030 |
Two cautions before you set a policy:
- These laws name gift certificates and gift cards. Whether account-based store credit or a refund taken as credit falls under them is a question for counsel.
- Cashback is earned with a purchase. Ask counsel whether each state where you sell treats it as given free.
Unclaimed Property and Escheat
Unclaimed property (escheat) laws make a business report and hand over money it owes a customer after a dormancy period, usually to the state of the customer's last known address. States differ on which balances count. In Washington, money or a credit owed to a customer from a retail sale is presumed abandoned three years after it arose, but the act excludes loyalty cards given without direct monetary consideration, gift certificates that comply with the state's gift certificate law, and store credit for returned merchandise (RCW 63.30.010 and 63.30.040, read November 13, 2026).
As with breakage, an amount you must remit stays a liability. Map which balances each state could claim, and agree the answer with counsel.
Controls That Keep Store Credit Liability Bounded
Three operating rules keep the balance bounded and easier to audit:
- Hold credit through your return window. Returned orders never pay out, so credit tracks the sales customers keep.
- Let refunds shrink the reward. Refunds, cancellations and order edits should reduce the credit with the order, so the balance follows net sales.
- Set an expiry, with reminders. Unspent credit is recognized when it expires, while credit that never expires waits until spending becomes remote, which PwC notes takes extensive data to judge. Reminders give customers a fair chance to spend first.
Smile Cashback, in early access, runs all three on Shopify's own store credit: a holding period through your return window; refunds, cancellations and order edits that shrink the reward with the order, with nothing to reconcile by hand; and expiry after 14 days to five years, or never, with reminder emails 30, 7 and 1 day before by default. Because it issues Shopify store credit, the balance sits in Shopify's store credit reports like any other. Our team sets it up with you.
Smile is Built for Shopify and a Shopify Certified Technology Partner (Shopify App Store, November 2026), and SOC 2 Type II audited (May 2026). For every cashback app compared, see the best cashback and store credit apps for Shopify.
Frequently Asked Questions
Is unspent store credit a liability? Yes. Until it is spent, expires or is handed to a state, store credit is an obligation to deliver goods, carried as a liability; Shopify's Outstanding store credit balance report tracks the total. Cashback earned on a sale carries the revenue allocated to it, refund credit and bought gift cards their full value.
How should an ecommerce brand account for store credit liability and breakage? Classify each credit by how it was issued. Under ASC 606 and IFRS 15, cashback earned on a purchase is typically a material right, with part of the order's revenue deferred until it is spent; refund credit and gift cards are prepayments; goodwill credit usually reduces revenue. Recognize expected breakage in proportion to spending, or when spending becomes remote.
What is breakage? Breakage is the share of store credit, gift card balances or points that customers never use. A brand that expects breakage recognizes it as revenue in proportion to customer spending; otherwise it waits until spending becomes remote (ASC 606 and IFRS 15). Amounts owed to a state under unclaimed property laws are never breakage revenue.
Does store credit expire, and can a brand set an expiry date? On Shopify, only if you set a date when you issue it, and the credit expiring first is spent first. Whether you may set one depends on local law: US federal law, California and Washington allow a disclosed expiry date on loyalty and promotional credit but limit expiry on value customers paid for. Check local laws, as Shopify advises, with counsel.
Can store credit expire in California? It depends on the credit. California Civil Code section 1749.5 bars expiry dates and service fees on gift certificates, including gift cards, and since April 1, 2026 a balance under $15 must be paid in cash on request. A certificate given free under an awards, loyalty or promotional program may expire if the date is printed in capital letters, in at least 10-point type, on the front. Ask counsel whether your store credit counts.
Is store credit subject to unclaimed property laws? Sometimes, and each state sets its own rules. In Washington, a credit owed to a customer from a retail sale is presumed abandoned three years after it arose, but loyalty cards given free, compliant gift certificates and store credit for returned merchandise are excluded. Any amount you must remit stays a liability, never breakage revenue.
What happens to the liability when store credit expires on Shopify? Shopify's Outstanding store credit balance report shows expired credit in its own column. In the books, the unspent balance is released to revenue at expiry unless a state can claim it. Gift cards differ: an expired gift card's balance keeps counting in Shopify's Outstanding gift card balance report until you deactivate the card.
This guide is general information, not accounting or legal advice. Agree the treatment of your store credit with your auditor and counsel.
