Under what circumstances does Del Taco recognize liabilities for contingencies?

According to the 2025 FDD, Del Taco recognizes liabilities for contingencies when it is probable that an asset has been impaired or a liability has been incurred. In addition, the amount of the impairment or loss can be reasonably estimated. The FDD notes that the ultimate legal and financial liability with respect to such matters cannot be estimated with certainty and requires the use of estimates. When the reasonable estimate is a range, the recorded amount is based on where the company falls within that range.

This means that Del Taco, like most companies, follows standard accounting practices by recording potential losses or liabilities on its balance sheet when they are likely to occur and can be reasonably quantified. This is a conservative approach to financial reporting, ensuring that the company's financial statements accurately reflect its potential obligations.

For a prospective franchisee, this information is relevant because it provides insight into how Del Taco manages and reports its financial risks. Understanding the company's approach to contingencies can help franchisees assess the overall financial health and stability of the Del Taco franchise system. Franchisees should be aware that these estimates are subject to change and could impact the company's financial performance.