ASC 405-924

Entertainment—Casinos

405 Liabilities

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In brief

IntermediateRecognition Subsequent measurement Industry-specific Contingencies and guarantees

This Subtopic governs two casino-specific liabilities: outstanding gaming chips and jackpot obligations. A casino recognizes a chip liability equal to the difference between chips placed in service and chips in its own custody/control, adjusted periodically for chips that will never be redeemed. Jackpot liabilities are accrued only when the casino has an obligation to pay — base jackpots that can be avoided (e.g., by pulling the machine) are not accrued, while the customer-funded incremental portion of a progressive jackpot is accrued as play occurs.

Key points (7)

Gaming chips are accounted for from the time the casino receives them, even if held in reserve rather than issued immediately (405-924-25-1).
When a customer exchanges cash for chips, the casino has a liability until the chips are redeemed or won by the house; the liability equals chips placed in service less the chip inventory in the casino's custody or control (405-924-25-1).
The chip liability shall be adjusted periodically to estimate chips that will never be redeemed, such as chips lost or kept as souvenirs (405-924-35-1).
A liability for a jackpot is accrued at the time the entity has the obligation to pay it (or the applicable portion), regardless of the manner of payment (405-924-25-2).
No liability is recognized for a base jackpot the entity can avoid paying (for example, by removing the machine from play), even if it has no intention of removing the machine and expects the jackpot to be won (405-924-55-1).
Where regulators treat the incremental portion of a progressive jackpot as customer-funded and require payout, that incremental portion is accrued as a liability at the time of funding (play) by customers (405-924-55-2).
Scope follows the Overall Casinos Subtopic, Section 924-10-15 (405-924-15-1).

For students. The tested distinction is base vs. progressive jackpots: an avoidable base jackpot creates no liability no matter how likely a payout is, while the customer-funded incremental progressive amount accrues with play. Students often wrongly assume expected payment alone triggers accrual — the trigger is a present obligation the casino cannot avoid.

gaming chip liability chips placed in service unredeemed chips base jackpot progressive jackpot obligation to pay customer-funded jackpot increment breakage estimate

Machine-generated study aid for ASC 405-924. Check the source paragraphs below.

405-924-00Status

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405-924-00-1

The following table identifies the changes made to this Subtopic.

Paragraph	Action	Accounting Standards Update	Date

Base Jackpot	Added	Accounting Standards Update No. 2014-09	05/28/2014
Slot Machine	Added	Accounting Standards Update No. 2014-09	05/28/2014

924-405-05-1	Amended	Accounting Standards Update No. 2014-09	05/28/2014
924-405-25-2	Added	Accounting Standards Update No. 2014-09	05/28/2014
924-405-55-1	Added	Accounting Standards Update No. 2014-09	05/28/2014
924-405-55-2	Added	Accounting Standards Update No. 2014-09	05/28/2014

405-924-05Overview and Background

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405-924-05-1

This Subtopic addresses the following:

a
The accounting for gaming chips held in inventory by casino entities and for gaming chips distributed to casino customers.
b
The accounting for jackpot liabilities.

405-924-15Scope and Scope Exceptions

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Overall Guidance

405-924-15-1

This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 924-10-15.

405-924-25Recognition

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Gaming Chips

405-924-25-1

Gaming chips are accounted for from the time the casino receives them even though the casino may not issue them immediately, but, instead, hold them in reserve. When a customer exchanges cash for gaming chips, the casino has a liability as long as those chips are not redeemed or won by the house. That liability is established by determining the difference between the total chips placed in service and the actual inventory of chips in custody or under the control of the casino.

Jackpot Liabilities

405-924-25-2

An entity shall accrue a liability at the time the entity has the obligation to pay the jackpot (or a portion thereof as applicable), regardless of the manner of payment. See paragraphs

924-405-55-1 through 55-2

for implementation guidance.

405-924-35Subsequent Measurement

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Unredeemable Gaming Chips

405-924-35-1

The chip liability shall be adjusted periodically to reflect an estimate of chips that will never be redeemed (for example, chips that have been lost, taken as souvenirs, and so on).

405-924-55Implementation Guidance and Illustrations

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Implementation Guidance

405-924-55-1

The implementation guidance in this paragraph and the following paragraph addresses the application of paragraph 924-405-25-2. Some slot machines or other games may contain base jackpots. Depending on the applicable gaming regulations, an entity may be able to avoid the payment of a base jackpot, for example, by removing the machine from play. In accordance with the guidance in paragraph 924-405-25-2, no liability associated with the base jackpot is recognized in such cases until the entity has the obligation to pay the base jackpot. That is the case even if the entity has no intention of removing the machine from play and expects the base jackpot to ultimately be won.

405-924-55-2

This implementation guidance addresses the application of paragraph 924-405-25-2. Some slot machines or other gaming machines include progressive jackpots. Entities in many gaming jurisdictions cannot avoid payment of the portion of the progressive jackpot that is incremental to the base jackpot because the gaming regulators consider the incremental portion of the jackpot to be funded by customers and required to be paid out (whether as a jackpot or through other means, such as a raffle). Paragraph 924-405-25-2 requires that, in such cases, the incremental portion of the jackpot be accrued as a liability at the time of funding (play) by its customers.