What was the provision for income taxes for Carbones Pizzeria for the year ended October 31, 2023?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company accounts for income taxes under asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributed to temporary differences between the financial reporting basis and the respective tax basis of these assets and liabilities
Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which the differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in income in the period that includes the enactment date.
A valuation allowance is recorded 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. Based on its facts, the Company considered all 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.
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the company accounts for income taxes under the asset and liability method. This approach necessitates the recognition of deferred tax assets and liabilities, reflecting the anticipated future tax implications arising from temporary differences between the financial reporting and tax bases of assets and liabilities. These deferred tax assets and liabilities are gauged using the enacted tax rates expected to be in effect during the years when these differences are projected to be resolved.
The document further states that the impact of any changes in tax rates on deferred tax assets and liabilities is recognized as income during the period encompassing the enactment date. A valuation allowance is established for carryforwards and other deferred tax assets if it is deemed more likely than not that some or all of these assets will not be realized.
In assessing the necessity for a valuation allowance, Carbones Pizzeria considers all available evidence, both positive and negative, including historical levels of taxable income, expectations, risks associated with estimates of future taxable income, and ongoing tax planning strategies.