As of December 31, 2022, what was the valuation allowance for Benihana and what did it relate to?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
s made.
F-10
The Company reduces its deferred tax assets by a valuation allowance if it determines that it is more likely than not that some portion or all of these tax assets will not be realized. In making this determination, the Company considers various qualitative and quantitative factors, such as:
- the level of historical taxable income;
- the projection of future taxable income over periods in which the deferred tax assets would be deductible;
- events within the restaurant industry;
- the health of the economy; and,
- historical trending.
As of December 31, 2022, the Company had a valuation allowance of $0.6 million that relates to foreign tax credits that the Company does not expect to utilize as a result of generating income in a jurisdiction with a higher income tax rate than the U.S. The recording of deferred taxes requires significant management judgment regarding the interpretation of applicable statutes, the status of various income tax audits, and particular facts and circumstances.
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, 2022, the company had a valuation allowance of $0.6 million. This allowance specifically relates to foreign tax credits that Benihana does not anticipate using. This is due to the company generating income in jurisdictions where the income tax rate is higher than that of the United States.
Benihana reduces its deferred tax assets by establishing a valuation allowance when it's deemed more likely than not that some or all of these tax assets will not be realized. This determination involves considering various factors. These factors include historical taxable income, projections of future taxable income over periods in which the deferred tax assets would be deductible, events within the restaurant industry, the health of the economy, and historical trending.
The recording of deferred taxes requires significant judgment from Benihana's management. This judgment involves interpreting applicable statutes, assessing the status of various income tax audits, and considering particular facts and circumstances. This process reflects the complexities involved in international tax management and the need for careful financial planning within the Benihana franchise system.