How does Craters & Freighters record a liability for uncertain tax positions?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
would not have an impact at the entity level.
The Company has adopted FASB ASC 740-10-25, Accounting for Uncertainty in Income Taxes. The Company will record a liability for uncertain tax positions when it is more likely than not that a tax position would not be sustained if examined by the taxing authority. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and authoritative rulings.
Note 1: Summary of Significant Accounting Policies (Continued)
Uncertain Tax Positions (Continued)
The Company's evaluation on December 31, 2024 and 2023 revealed no uncertain tax positions that would have a material impact on the financial statements. The 2020 through 2023 tax years remain subject to examination by the IRS.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters FDD, the company has adopted FASB ASC 740-10-25, Accounting for Uncertainty in Income Taxes. Craters & Freighters will record a liability for uncertain tax positions when it is more likely than not that a tax position would not be sustained if examined by the taxing authority. The company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and authoritative rulings.
As a pass-through entity, any changes resulting from an examination by the IRS or the Colorado Department of Revenue would not have an impact at the entity level. The evaluation performed by Craters & Freighters on December 31, 2024 and 2023, revealed no uncertain tax positions that would have a material impact on the financial statements. The 2020 through 2023 tax years remain subject to examination by the IRS. Craters & Freighters does not believe that any reasonably possible changes will occur within the next twelve months that will have a material impact on the financial statements.
For a prospective franchisee, this means that Craters & Freighters is proactive in addressing potential tax uncertainties and adheres to standard accounting practices in doing so. However, because Craters & Freighters is an S-Corporation, the tax liability falls on the shareholder and not the company. This also means that the company does not anticipate any material impact on its financial statements due to uncertain tax positions.