As of December 31, 2021, what was the valuation allowance that Benihana had, and what did it relate to?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
state NOL carryforwards. The determination of the state NOL carryforwards is dependent upon apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards. The state NOLs expire at various dates from 2035 to 2040. The state and local tax credit carryforwards expire at various dates from 2022 through 2028.
In assessing the realizability of deferred tax assets, the Company evaluates whether it is more likely than not that the deferred tax assets will be realized. In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evide
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, as of December 31, 2021, the company had a valuation allowance of $0.3 million. This allowance relates to foreign tax credits that Benihana does not anticipate using because they generate income in a jurisdiction where the income tax rate is higher than in the United States.
Benihana evaluates the possibility of realizing deferred tax assets to determine if the assets will be realized. In assessing the valuation allowance, Benihana considers positive and negative evidence, including current operating results, tax planning strategies, and forecasts of future earnings.
For a prospective franchisee, this information highlights the complexities of Benihana's tax management and international operations. While the valuation allowance itself may not directly impact day-to-day operations, it reflects Benihana's approach to financial planning and risk assessment. Understanding these aspects can provide franchisees with a more comprehensive view of the company's financial health and strategic decision-making.