What do the deferred tax assets and liabilities represent for Afuri Ramen Dumpling?
Afuri_Ramen_Dumpling Franchise · 2024 FDDAnswer from 2024 FDD Document
The deferred tax asset and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered and settled, respectively.
| Federal | $ - |
|---|---|
| State | 5,166 5,166 |
| Deferred taxes: | |
| Federal | |
| States | (24,000) (24,000) S (18,834) |
| Deferred tax assets and liabilities were comprised of the | following at December 31, 2022: |
| Deferred tax assets: | |
| Deferred revenue | $ 24,000 |
| Gift card liabilities | 1,000 |
| Total deferred tax assets | 25,000 |
| Deferred tax liabilities: | |
| Accounts receivable | (1,000) |
| Total deferred tax liabilities | (1,000) |
| Gross net deferred taxes | 24,000 |
| Valuation allowance | |
| Net deferred tax assets | $ 24,000 |
Source: Item 23 — Receipts (FDD pages 50–189)
What This Means (2024 FDD)
According to Afuri Ramen Dumpling's 2024 Franchise Disclosure Document, deferred tax assets and liabilities represent the future tax return consequences of temporary differences between financial and tax reporting. These differences will either be taxable or deductible when the assets and liabilities are recovered and settled, respectively. In simpler terms, these deferred taxes arise because certain items are recognized for accounting purposes in one period, but for tax purposes in a different period. This creates a temporary difference between the book value and the tax basis of an asset or liability.
Specifically, as of December 31, 2022, Afuri Ramen Dumpling's deferred tax assets included $24,000 related to deferred revenue and $1,000 related to gift card liabilities, totaling $25,000. Deferred tax liabilities included $1,000 related to accounts receivable. The gross net deferred taxes amounted to $24,000, which also represents the net deferred tax assets after accounting for the valuation allowance.
For a prospective Afuri Ramen Dumpling franchisee, understanding deferred tax assets and liabilities is crucial for assessing the financial health and tax obligations of the franchise. These deferred tax items can impact the future tax liabilities and potentially affect the overall profitability of the franchise. It is important to consult with a financial advisor to fully understand the implications of these deferred tax items and how they may affect the franchisee's financial planning and tax strategy.