What was the result of Checkersrallys changing its methodology related to the reversal of deferred tax liabilities as of December 30, 2024 (Successor)?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
's deferred tax assets will not be realized in a future period. As of December 30, 2024 (Successor) and January 1, 2024 (Successor), the valuation allowance has been adjusted to the amount of deferred tax assets, net of reversing deferred tax liabilities, that management believes will not be realized.
The Company changed its methodology related to reversal of deferred tax liabilities as of December 30, 2024 (Successor) based an evaluation of the facts and generally accepted accounting practice. The Company previously concluded the life of the brand intangible was indeterminable, and therefore did not use it as a source of realization. The Company changed its methodology as it determined it was appropriate to use the indefinite-life brand intangible as a source of reali
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, a change in methodology related to the reversal of deferred tax liabilities as of December 30, 2024, resulted in a reduction of the valuation allowance. Previously, Checkersrallys did not consider the indefinite-life brand intangible as a source of realization.
Checkersrallys changed its approach after determining it was appropriate to use the indefinite-life brand intangible as a source of realization for its indefinite life deferred tax assets. These assets included interest limitation carryforwards and deferred tax assets that would become indefinite-life net operating losses in future periods.
As a result of this change in methodology, Checkersrallys recognized a reduction of $28.8 million in the valuation allowance as of December 30, 2024. This adjustment reflects a more optimistic view of the company's ability to utilize its deferred tax assets in the future, based on the value of its brand intangible.