What were the valuation allowance balances for Bhc as of December 31, 2023 and 2024?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
of rental expenses for its two retail stores in 2024 based on the actual lease payments in 2024.
NOTE 7 Advertising
The Company principally expenses advertising costs as they incur unless the advertising can be justifiably capitalized. Such capitalized advertising will be subject to impairment review and expenses rationally. The Company incurred advertising cost in the amount of $360,537 for the year ended December 31, 2024.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2024
NOTE 8 Commitments and Contingencies
there are no known claims and pending legal actions against the Company incidental to and arising out of the ordinary course of the busine
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, the valuation allowance balances were $227,030 as of December 31, 2023, and $664,576 as of December 31, 2024. A valuation allowance is a reduction to deferred tax assets based on the likelihood that the company will not be able to use those assets in the future.
In Bhc's case, the deferred tax assets, which represent future tax benefits as of December 31, 2024, would have been $664,576. However, these benefits were fully offset by a valuation adjustment, resulting in no tax benefit and no deferred tax assets presented on the financial statements. This means that Bhc determined it was more likely than not that they would not be able to realize the full value of these deferred tax assets.
For a prospective franchisee, this information provides insight into Bhc's financial performance and its expectations regarding future profitability. The fact that Bhc has a significant valuation allowance suggests that the company has experienced losses or anticipates future losses that may limit its ability to utilize deferred tax assets. While not uncommon for companies in their early stages or those experiencing financial difficulties, it is a point worth further investigation to understand the underlying reasons and potential impact on the franchise system's long-term financial health.