As of January 1, 2024, what was the amount of the valuation allowance adjusted to for Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities recognized within "deferred income tax liabilities" in the accompanying consolidated balance sheets as of December 30, 2024 (Successor) and January 1, 2024 (Successor) were as follows:
| For the Year Ended December 30, 2024 (Successor) | For the Period Ended January 1, 2024 (Successor) | |||
|---|---|---|---|---|
| Deferred tax assets | ||||
| Net operating loss carryforwards | $ 58 | $ | - | |
| Business interest limitation carryforward | 24,472 | 21,518 | ||
| Accruals | 2,184 | 2,211 | ||
| Operating ROU assets | 36,262 | 39,355 | ||
| Difference between book and tax basis of property and equipment | 3,183 | 9,423 | ||
| Allowance for credit losses | 163 | 69 | ||
| Stock-based compensation | - | 32 | ||
| Deferred revenue and other | 2,291 | 2,507 | ||
| Deferred tax assets | 68,613 | 75,115 | ||
| Less: valuation allowance | (10,188) | (38,288) | ||
| Net deferred tax assets | 58,425 | 36,827 | ||
| Deferred tax liabilities | ||||
| Difference between book and tax basis of brands intangible assets | (49,122) | (48,300) | ||
| Difference betw |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the valuation allowance as of January 1, 2024, was $38,288 (in thousands). This valuation allowance is a reduction in the company's deferred tax assets. Deferred tax assets arise when there are temporary differences between the book value of an asset or liability and its tax basis, leading to future tax benefits. However, if Checkersrallys believes that it is more likely than not that some or all of the deferred tax assets will not be realized, a valuation allowance is established to reduce the carrying amount of the deferred tax assets to the amount that is expected to be realized.
For a prospective franchisee, this information is relevant because it provides insight into Checkersrallys's financial health and its expectations regarding future profitability. A significant valuation allowance could indicate uncertainty about the company's ability to generate future taxable income to utilize the deferred tax assets. This could be due to various factors, such as past losses or anticipated changes in the business environment.
It's important to note that the valuation allowance is an accounting estimate and is subject to change based on Checkersrallys's future performance and expectations. While a valuation allowance doesn't directly impact the day-to-day operations of a franchise, it does reflect the company's overall financial strategy and outlook, which can be a useful consideration for potential franchisees.