What is Exit required to do regarding the realizability of its deferred tax assets?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
-----------------------------|---------------|---------------|---------------| | Deferred revenue | $ 606,770 | $ 685,430 | $ 686,950 | | Property and equipment | (48,290) | (66,230) | (76,420) | | Regional rights | (973,740) | (931,200) | (825,530) | | Disallowed at-risk loss | 57,366 | - | - | | Lawsuit settlement | 382,577 | - | - | | Net operating loss carryforwards | 1,636,819 | 1,675,522 | 485,000 | | Valuation allowance | (1,309,497) | (1,247,522) | - | | Net deferred tax asset | $ 352,005 | $ 116,000 | $ 270,000 |
The net operating losses for United States taxes relate to losses incurred by Ah$um America, Inc. expire between the years ending December 31, 2025-2030. Net operating losses for United States taxes related to losses incurred by EXIT Realty Corp. USA do not expire, but are subject to certain limitations. Ah$um America, Inc. has total net operating losses of $6,913,151 and EXIT Realty Corp. U
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the company evaluates the realizability of its deferred tax assets. This means Exit assesses whether it is likely to actually receive the future tax benefits associated with these assets. A valuation allowance is established if it's deemed more likely than not that some or all of the deferred tax assets will not be realized.
In determining the need for a valuation allowance, Exit considers all available evidence. This includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. These factors help Exit determine if it will have sufficient taxable income in the future to utilize the deferred tax assets.
As of December 31, 2024, Exit had a valuation allowance of $1,314,680 against deferred tax assets related to net operating losses. During the year ended December 31, 2024, the valuation allowance increased by $67,157, due to the realizability of net operating loss carryforwards recorded by Ah$um America, Inc. Exit's management states that they will continue to assess the need for a valuation allowance in future periods based on the company's operating results and other factors. This ongoing assessment is a standard accounting practice to ensure that the financial statements accurately reflect the company's financial position.