What was the net deferred tax liability for Chem Dry at the end of 2023?
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 2023 was a negative amount, specifically $ (3,266). This figure represents the net balance of deferred tax assets and deferred tax liabilities, indicating that Chem Dry had more deferred tax liabilities than assets at that time. Deferred tax liabilities generally arise from temporary differences between the book value of an asset or liability and its tax basis. These differences will result in taxable amounts in the future when the asset is recovered or the liability is settled.
For a prospective Chem Dry franchisee, understanding the parent company's deferred tax position can provide insights into its financial health and future tax obligations. A net deferred tax liability suggests that the company may have higher tax payments in the future, which could impact its profitability and cash flow. However, it's important to note that deferred taxes are non-cash items and do not represent an immediate cash outflow.
It is also important to note that the 2022 net deferred tax liability was $ (3,001) and the 2021 net deferred tax liability was $ (5,596). Reviewing these figures over a three-year period provides a trend that may be useful for a prospective franchisee to consider. A prospective franchisee should consult with a financial advisor to fully understand the implications of deferred tax liabilities and how they might affect the overall financial performance of Chem Dry.