What was the reported net deferred tax assets for Benihana as of December 31, 2020?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
ect to IRC Section 162(m) | 6.2% | — | | Equity based compensation | (7.6)% | — | | PPP income exclusion | (11.6)% | — | | Other items, net | (0.6)% | 3.2 % | | Effective income tax rate | 4.7 % | (28.4)% |
The income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows (in thousands):
| For the years ended December 31, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Deferred tax assets: | ||||
| Operating lease liabilities | $ | 17,152 | $ | 15,255 |
| Stock compensation | 247 | 439 | ||
| FICA tip credit carryforward | 9,929 | 6,860 | ||
| Net operating loss | 3,290 | 6,038 | ||
| Goodwill | 1,055 | 1,283 | ||
| Inventory | 10 | 23 | ||
| Charitable contributions carryforward | — | 2 | ||
| Foreign tax credit carryforward | 382 | 336 | ||
| Deferred revenue | 165 | 321 | ||
| State and local tax credit carryforward | 310 | 299 | ||
| Expenses not deductible until paid | 1,667 | 985 | ||
| Basis in LLC interest | — | 175 | ||
| IRC 163(j) disallowed interest carryforward | — | 835 | ||
| Debt issuance costs | 143 | — | ||
| Kona related acquisition costs | 813 | 201 | ||
| Deferred payroll taxes | 281 | 703 | ||
| T |
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the net deferred tax assets as of December 31, 2020, were reported as $13,226. This figure represents the net value of deferred tax assets after accounting for deferred tax liabilities and any valuation allowance. Deferred tax assets arise from temporary differences between the book value of assets and liabilities and their tax bases, as well as from operating loss and tax credit carryforwards. These assets are expected to reduce taxable income in future years.
The FDD also provides a breakdown of the components contributing to the total deferred tax assets. These include items such as operating lease liabilities ($15,255), stock compensation ($439), FICA tip credit carryforward ($6,860), net operating loss ($6,038), goodwill ($1,283), inventory ($23), charitable contributions carryforward ($2), foreign tax credit carryforward ($336), deferred revenue ($321), state and local tax credit carryforward ($299), expenses not deductible until paid ($985), basis in LLC interest ($175), IRC 163(j) disallowed interest carryforward ($835), deferred payroll taxes ($703). These various components reflect the specific tax-related items that Benihana expects to impact its future tax obligations.
It's important to note that these figures are based on accounting estimates and are subject to change. Factors such as changes in tax laws, business operations, and economic conditions can affect the realization of deferred tax assets. Additionally, Benihana corrected some prior period presentations related to deferred tax assets and liabilities, specifically regarding operating leases and net operating losses. While management deemed these corrections immaterial to prior periods, prospective franchisees should be aware of the complexities involved in accounting for deferred taxes and the potential for adjustments.