What was the net deferred tax liability for Chem Dry in 2022 (as restated)?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
to income before taxes is as follows:
| 2022 | |||||
|---|---|---|---|---|---|
| 2023 | (As Restated) | 2021 | |||
| Income tax (recovery) expense, computed at 21 | |||||
| percent of pretax income | $ | (9,416) $ | (830) $ | 873 | |
| Permanent differences | 9,568 | - | - | ||
| State income tax expense (recovery) | 168 | (42) | 257 | ||
| Other | 157 | (997) | 89 | ||
| Total provision for income taxes | $ | 477 | $ (1,869) $ | 1,219 |
The details of the net deferred tax liability are as follows:
| 2023 | (As Restated) | 2021 | |
|---|---|---|---|
| Deferred tax assets: | |||
| Allowance for credit losses | $ 531 | $ 941 | $ 1,312 |
| Deferred revenue | 1,259 | 1,759 | 2,365 |
| Notes receivable |
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, the net deferred tax liability for 2022 (as restated) was $(3,001). This figure represents the net amount of future tax obligations that Chem Dry has deferred to later years, after considering both deferred tax assets and deferred tax liabilities.
Deferred tax liabilities typically arise from temporary differences between the book (financial reporting) and tax values of assets and liabilities. For example, if Chem Dry depreciates an asset faster for tax purposes than for financial reporting, it will create a deferred tax liability. This means that in the future, Chem Dry will pay more in taxes than what is reported on its income statement due to the reversal of these temporary differences.
A net deferred tax liability, as opposed to a net deferred tax asset, indicates that Chem Dry has more future tax obligations deferred than future tax benefits. This can impact Chem Dry's future cash flow and profitability, as the company will eventually need to settle these deferred tax liabilities. Prospective franchisees should be aware of this liability, as it could affect Chem Dry's financial performance and, by extension, the stability of the franchise system.
It is important to note that this figure is a snapshot in time and can change significantly from year to year based on Chem Dry's financial performance and tax strategies. Franchisees should consult with a financial advisor to understand the implications of deferred tax liabilities on their investment.