How does Checkersrallys treat interest and penalties related to uncertain tax positions?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company evaluates uncertain tax positions based upon one of the following conditions: (1) the tax position is not more likely than not to be sustained; (2) the tax position is more likely than not to be sustained, but for a lesser amount; or (3) the tax position is more likely than not to be sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax position is uncertain, (1) the Company presumes the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information; (2) the technical merits of a tax position are derived from authorities, such as legislation and statutes, legislative intent, regulations, rulings, and case law and their applicability to the facts and circumstances of the tax position; and (3) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken. The Company recognizes interest and penalties associated with uncertain tax positions as part of its income tax provision. A number of years may elapse before a particular uncertain tax position is audited and finally resolved or when a tax assessment is raised. Although the outcome of tax audits is always uncertain, the Company believes adequate amounts of tax, including interest and penalties, have been provided for any adjustments that are expected to result from those years.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company incorporates interest and penalties associated with uncertain tax positions as part of its income tax provision. Checkersrallys evaluates uncertain tax positions based on whether the position is more likely than not to be sustained, sustained for a lesser amount, or sustained in a different financial period.
In evaluating these positions, Checkersrallys assumes the tax position will be examined by the relevant taxing authority with full knowledge of all relevant information. The technical merits are derived from authorities like legislation, statutes, legislative intent, regulations, rulings, and case law, applied to the specific facts and circumstances. Each tax position is evaluated independently, without considering potential offsets or aggregation with other tax positions.
It may take several years for an uncertain tax position to be audited and resolved or for a tax assessment to be raised. While the outcomes of tax audits are always uncertain, Checkersrallys believes it has provided adequate amounts for expected adjustments, including interest and penalties, resulting from those years. This means that Checkersrallys aims to account for potential tax liabilities, including interest and penalties, in its financial statements, providing a more accurate representation of its financial position.