What is the total amount of deferred tax liability for Carbones Pizzeria?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
The tax effects of temporary differences between financial statements and tax reporting give rise to deferred tax assets and deferred tax liabilities are presented below:
| Allowance for doubtful accounts | $ 54,000 |
|---|---|
| Change in accruals | 9,000 |
| Total deferred tax assets | 63,000 |
| Deferred tax liability: | |
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to the 2025 FDD, Carbones Pizzeria's deferred tax liability is detailed in the notes to the consolidated financial statements. For the year ended October 31, 2022, the total deferred tax liability related to property and equipment was $(19,000). This means that the company had a deferred tax liability of $19,000 due to temporary differences in the financial reporting and tax bases of property and equipment.
For the year ended October 31, 2023 and 2024, the FDD excerpts do not contain a table outlining the deferred tax assets and liabilities. However, the notes to the consolidated financial statements explain that Carbones Pizzeria accounts for income taxes under the asset and liability method, which necessitates recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences. These differences arise between the financial reporting basis and the tax basis of assets and liabilities.
It is important to note that deferred tax assets and liabilities are measured using the enacted tax rates expected to apply when these differences are settled. A valuation allowance is recorded if it is more likely than not that some or all of the deferred tax assets will not be realized. For a prospective franchisee, understanding these deferred tax implications is crucial for assessing the financial health and tax obligations of Carbones Pizzeria. Reviewing the complete financial statements and consulting with a financial advisor can provide a clearer picture of the company's tax position.