How does Best In Class Education Center account for income taxes in its financial statements?
Best_In_Class_Education_Center Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company provides for income taxes utilizing the liability method recognizing taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company's financial statements or tax returns. The deferred taxes represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period when the new rate is enacted.
Source: Item 23 — RECEIPT (FDD pages 47–204)
What This Means (2025 FDD)
According to Best In Class Education Center's 2025 Franchise Disclosure Document, the company uses the liability method for accounting for income taxes. This approach involves recognizing taxes that are either payable or refundable for the current year. It also accounts for deferred tax liabilities and assets, which represent the future tax consequences of events already recognized in the company's financial statements or tax returns.
The deferred taxes reflect the future tax implications of differences between the book and tax bases of assets and liabilities. These differences will result in either deductible or taxable amounts when the assets and liabilities are recovered or settled. Best In Class Education Center measures these deferred tax assets and liabilities using the enacted tax rates expected to be in effect during the years when the temporary differences will reverse.
Furthermore, the FDD states that the effect of any changes in tax rates on deferred tax assets and liabilities is recognized during the period when the new tax rate is enacted. For example, the company's effective federal income tax rate was 23% in 2024 and 21% in 2023. The company had income tax expenses of $5,447 and income tax benefits of $8,668 for the year ended December 31, 2024 and the period from February 10, 2023 to December 31, 2023, respectively. This approach ensures that the financial statements reflect the most current tax laws and their potential impact on the company's financial position.