How often are Checkers' deferred tax assets reviewed for recoverability?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company accounts for income taxes in accordance with the provisions of ASC 740, Income Taxes, which requires the Company to recognize income tax benefits and expense of the changes in income tax assets and liabilities. Deferred tax assets must be reduced by a valuation allowance in certain circumstances. Realization of deferred tax assets is dependent on generating sufficient taxable income prior to the expiration of any tax attributes. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are adjusted as necessary.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the company reviews its deferred tax assets periodically for recoverability. This means that Checkers assesses the likelihood of realizing these assets, which are future tax benefits, and adjusts valuation allowances as necessary. The frequency of 'periodically' is not defined, but it implies regular, ongoing evaluation rather than a one-time assessment.
For a prospective Checkers franchisee, this indicates that the company is actively monitoring its tax position and making adjustments based on its financial performance and expectations. The review considers factors such as the company's ability to generate sufficient taxable income in the future to utilize these deferred tax assets. If it's determined that some assets are unlikely to be realized, a valuation allowance is created to reduce their carrying value on the balance sheet.
It's important to note that the management of deferred tax assets and the establishment of valuation allowances can impact Checkers' reported financial results. Franchisees should be aware of these accounting practices and how they can affect the company's financial statements. Understanding the factors that influence the recoverability of deferred tax assets can provide insights into the company's financial health and future prospects.
While the FDD states that these assets are reviewed 'periodically,' prospective franchisees may want to inquire with Checkers about the specific intervals at which these reviews occur (e.g., quarterly, annually) to gain a clearer understanding of their financial oversight processes.