What was the total deferred tax liability for Carbones Pizzeria?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
e depreciation expense as well as changes in accruals.
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 | $ 34,000 |
|---|---|
| Change in accruals | 5,000 |
| Total deferred tax assets | 39,000 |
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the total deferred tax liability as of October 31, 2023, was ($26,000). This liability is related to property and equipment. The document also notes a total deferred tax asset of $39,000, which includes an allowance for doubtful accounts of $34,000 and a change in accruals of $5,000. The net deferred tax asset is $13,000.
Deferred tax liabilities arise from temporary differences between the book value of assets and liabilities and their tax basis. In this case, the deferred tax liability is specifically associated with property and equipment. This means that Carbones Pizzeria has been depreciating these assets differently for financial reporting purposes compared to tax purposes, leading to a future tax obligation.
For a prospective franchisee, understanding these deferred tax implications is crucial for assessing the overall financial health of Carbones Pizzeria. It's important to note that deferred tax liabilities are not immediate cash outflows but represent future tax obligations that could impact profitability. Reviewing these figures over several years can provide insights into the company's tax planning strategies and potential future tax burdens.