How does Benihana evaluate the likelihood of realizing the benefit of its deferred tax assets?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
s that a deferred tax asset or liability could be realized in a greater or lesser amount than recorded, the deferred tax asset or liability is adjusted and a corresponding
adjustment is made to the provision for income taxes in the consolidated statements of operations and comprehensive income in the period during which the determination is made.
F-11
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.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the company evaluates the likelihood of realizing the benefit of deferred tax assets by considering various factors. Benihana 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, Benihana considers several qualitative and quantitative factors. These include 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.
Benihana's approach also involves significant management judgment regarding the interpretation of applicable statutes, the status of various income tax audits, and particular facts and circumstances. As of December 31, 2023, Benihana had a valuation allowance of $0.6 million related to foreign tax credits they do not expect to utilize due to generating income in a jurisdiction with a higher income tax rate than the U.S.