What causes deferred income taxes for Crepe De Licious?
Crepe_De_Licious Franchise · 2025 FDDAnswer from 2025 FDD Document
Deferred - The recognition of income and expenses in different periods for financial accounting and income tax purposes gives rise to timing difference that result in deferred income taxes.
Temporary differences that give rise to the net deferred income tax asset/liability consist primarily of credit loss expense, depreciation and lease expense, all of which are recognized differently for financial reporting and income tax purposes.
Source: Item 23 — RECEIPTS (FDD pages 57–233)
What This Means (2025 FDD)
According to Crepe De Licious's 2025 Franchise Disclosure Document, deferred income taxes arise because income and expenses are recognized in different periods for financial accounting and income tax purposes. This difference in timing results in what are termed 'timing differences,' which then lead to deferred income taxes.
Specifically, the temporary differences that create deferred income tax assets or liabilities primarily involve credit loss expense, depreciation, and lease expense. These items are treated differently for financial reporting compared to how they are treated for income tax purposes.
For a prospective Crepe De Licious franchisee, understanding deferred income taxes is crucial for interpreting the financial statements provided in the FDD. It highlights that the company's reported income may not perfectly align with its taxable income due to these timing differences in expense recognition. This can impact how a franchisee assesses the company's financial health and future tax obligations.