How often does Carls evaluate the realizability of its deferred income tax assets?

According to Carls's 2024 Franchise Disclosure Document, Carls evaluates the realizability of its deferred income tax assets on a quarterly basis. This means that every three months, Carls assesses whether it is likely to realize the tax benefits associated with these assets.

In performing this analysis, Carls considers all available evidence, both positive and negative. This includes historical operating results, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies that may be employed to prevent net operating loss (NOL) or tax credit carryforwards from expiring unused.

This evaluation is crucial for Carls because it determines whether a valuation allowance is needed. A valuation allowance is established to reduce the carrying amount of deferred income tax assets if it is more likely than not that some or all of the tax benefit of these assets will not be realized. This process ensures that Carls's financial statements accurately reflect the expected future tax benefits, which is important for investors and stakeholders.