What happens if it is more likely than not that some or all of the deferred tax assets of Carbones Pizzeria will not be realized?

According to the 2025 FDD, Carbones Pizzeria records a valuation allowance for carryforwards and other deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized. This means that Carbones Pizzeria reduces the value of these assets on its balance sheet to reflect the possibility that they may not provide a future tax benefit.

This accounting practice is based on available evidence, both positive and negative, including historical levels of taxable income, expectations, and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. This indicates that Carbones Pizzeria management makes a careful assessment to determine if a valuation allowance is needed.

For a prospective franchisee, this information is relevant because it provides insight into how Carbones Pizzeria manages its finances and accounts for potential tax liabilities. It demonstrates that the company takes a conservative approach to financial reporting by recognizing potential losses on deferred tax assets when the likelihood of realizing those assets is uncertain. This can help franchisees understand the financial stability and reporting practices of the franchisor.