How does Checkersrallys account for income taxes?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company accounts for income taxes based upon the provisions of ASC 740, Income Taxes. Under the asset and liability method required by ASC 740, Income Taxes, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets must be reduced by a valuation allowance when it becomes more likely than not that they will not be realized. Realization of the deferred tax assets is dependent on generating sufficient taxable income in the periods when the deferred tax assets are available to be utilized. The Company has recorded a valuation allowance against the deferred tax assets that are not realizable under this standard. The deferred tax assets are reviewed periodically for recoverability, and valuation allowances are adjusted as necessary. Under ASC 740, Income Taxes, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in in
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company adheres to ASC 740, Income Taxes, for accounting purposes. This standard involves the asset and liability method, where deferred tax assets and liabilities are recognized based on the future tax consequences of differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. These deferred tax assets and liabilities are measured using the enacted tax rates expected to be in effect when the temporary differences are recovered or settled.
Deferred tax assets are subject to a valuation allowance if it is deemed more likely than not that they will not be realized. Checkersrallys has recorded a valuation allowance against deferred tax assets that are not considered realizable under this standard. The realization of these assets depends on the company generating sufficient taxable income during the periods when the deferred tax assets can be utilized.
The FDD states that Checkersrallys periodically reviews these deferred tax assets for recoverability and adjusts valuation allowances as necessary. Furthermore, under ASC 740, any impact on deferred tax assets and liabilities resulting from changes in tax rates is recognized in the period the changes are enacted. This approach ensures that Checkersrallys's financial statements accurately reflect the potential future tax implications of its current assets and liabilities.