Pete,
Let me see if I can REALLY answer your question. Years ago the taxation laws would allow a casino to place its hotel on the accrual method of accounting and the casino on the cash method of accounting. This would give the Corporation the best of the tax law for each its entities - the hotel and the casino.

The casino would not have to recognize marker income until the marker was actually paid. This would save millions in tax dollars and not have to complicate the issue with the bad debt allowance which was also a favorite area for IRS agents.

To the best of my knowledge the last one to do this was the old MGM that burned down. It got in under the law change and was allowed the "cash" basis of accounting for the casino.

Since the cash method was an acceptable method of accounting the only time a problem would arise involving the financial statements was when the casino had to be converted to the accrual method for consolidation purposes with its other unrelated entities (movies, etc.) Otherwise the outstanding chip liability question did not exsist. Since the liability was contingent as to whether the chip WOULD EVER be redeemed it could be left off the financial statement and handled via footnote. Hence, the old MGM could do anything it liked on how the item was shown.

Today, the entity MUST be on the accrual method and the accruals are subject to the 2 1/2 month rule. In other words the accrual of the liability is not allowed unless the liability will be paid within 2 1/2 months of the close of the taxable year. This prevents the casino from deducting the outstanding chips as an expense. However, if you notice the income issue for the checks (chips)outstanding is still there.
Hope this helps and I hope I did not put you and everyone else to sleep!

Best, Mr."P"