What was the reported valuation allowance for Benihana as of December 31, 2022?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
| For the years ended December 31 | ecember 31, | |||
|---|---|---|---|---|
| 2023 | 2022 | |||
| Deferred tax assets: | _ | |||
| Operating lease liabilities | $ | 23,798 | $ | 18,871 |
| Stock compensation | 371 | 415 | ||
| FICA tip credit carryforward | 18,312 | 13,976 | ||
| Net operating loss | 5,543 | 3,203 | ||
| Goodwill | 753 | 906 | ||
| Inventory | 52 | 20 | ||
| Charitable contributions carryforward | 26 | 3 | ||
| Foreign tax credit carryforward | 622 | 622 | ||
| Deferred revenue | 126 | 190 | ||
| State and local tax credit carryforward | 78 | 135 | ||
| Expenses not deductible until paid | 83 | 298 | ||
| IRC 163(j) disallowed interest carryforward | 2,152 | 483 | ||
| Debt issuance costs | 82 | 113 | ||
| Kona Grill related acquisition costs | 693 | 755 | ||
| Total deferred tax assets | 52,691 | 39,990 | ||
| Deferred tax liabilities: | ||||
| Operating lease right-of-use assets | (17,360) | (13,974) | ||
| Depreciation and amortization | (19,888) | (13,064) | ||
| Other | (64) | (7) | ||
| Total deferred tax liabilities | (37,312) | (27,045) | ||
| Valuation allowance | (622) | (622) | ||
| Net deferred tax assets | $ | 14,757 | $ | 12,323 |
Tax Carryforwards
As of December 31, 2023, the Company has federal net operating loss ("NOL") carryforwards of $25.2 million which have no expiration date. The Company has various 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 a
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 is related to foreign tax credits that Benihana does not anticipate using because they generate income in a jurisdiction with a higher income tax rate than the U.S. This is an increase from December 31, 2021, when the valuation allowance was $0.3 million.
The valuation allowance reflects Benihana's assessment of the realizability of its deferred tax assets. This assessment involves evaluating whether it is more likely than not that these assets will be realized. In determining the valuation allowance, Benihana considered both positive and negative evidence, including current operating results, tax planning strategies, and forecasts of future earnings.
For a prospective franchisee, this information provides insight into Benihana's financial management and tax planning. The existence and size of the valuation allowance can indicate the company's expectations regarding its future ability to utilize foreign tax credits. While a valuation allowance is not inherently negative, it suggests that Benihana does not expect to fully benefit from these tax credits in the future. Franchisees may want to inquire about the specific factors contributing to this valuation allowance and how it might impact the company's overall financial performance.