Gift Cards

The Company sells gift cards, which can be used in its stores, on barnesandnoble.com and on NOOK^® devices. The Company does not charge administrative or dormancy fees on gift cards and gift cards have no expiration dates. Upon the purchase of a gift card, a liability is established for its cash value. Revenue associated with gift cards is deferred until redemption of the gift card. Over time, a portion of the gift cards issued is typically not redeemed. The Company estimates the portion of the gift card liability for which the likelihood of redemption is remote based upon the Company’s historical redemption patterns. The Company records this amount in income on a straight-line basis over a 12-month period beginning in the 13th month after the month the gift card was originally sold. The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to recognize revenue associated with gift cards. The Company recorded an additional $4.3 million of gift card breakage during the 13 weeks ended January 31, 2015 as redemptions continued to run lower than historical patterns. Additional breakage may be required if gift card redemptions continue to run lower than historical patterns.

The Company recognized gift card breakage of $10,126 and $5,831 during the 13 weeks ended January 31, 2015 and January 25, 2014, respectively, and $21,259 and $17,503 during the 39 weeks ended January 31, 2015 and January 25, 2014, respectively. The Company had gift card liabilities of $390,102 and $392,244 as of January 31, 2015 and January 25, 2014, respectively.