Under what method does Carbones Pizzeria account for income taxes?
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 using the asset and liability method. This approach involves recognizing deferred tax assets and liabilities to account for the future tax consequences resulting from temporary differences between the financial reporting basis and the tax basis of assets and liabilities.
Deferred tax assets and liabilities are measured using the enacted tax rates expected to be in effect when these differences are recovered or settled. Any changes in tax rates will be recognized in the income for the period that includes the enactment date.
A valuation allowance is recorded for carryforwards and other deferred tax assets if it is determined that it is more likely than not that some or all of the deferred tax assets will not be realized. Carbones Pizzeria considers all available evidence, both positive and negative, including historical levels of taxable income, expectations, risks associated with future taxable income estimates, and tax planning strategies when assessing the need for a valuation allowance. This ensures that the financial statements accurately reflect the potential impact of income taxes on the company's financial position.