What accounting standard does Fly To Fit use for income taxes?
Fly_To_Fit Franchise · 2024 FDDAnswer from 2024 FDD Document
enue and will be recognized over the term of the franchise agreement.
Income Taxes
The Company applies ASC 740 Income Taxes ("ASC 740"). Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax expense for the period, if any and the change during the period in deferred tax assets and liabilities.
Net operating losses will be carried forward to reduce taxable income in future years.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 44)
What This Means (2024 FDD)
According to Fly To Fit's 2024 Franchise Disclosure Document, the company applies ASC 740 Income Taxes ("ASC 740"). This means Fly To Fit adheres to the accounting standards outlined in the Accounting Standards Codification (ASC) 740, which specifically deals with income taxes.
The FDD states that deferred income taxes are recognized for the future tax consequences of differences between the tax bases of assets and liabilities and their financial statement reported amounts. These calculations are based on enacted tax laws and statutory tax rates applicable to the periods when the differences are expected to affect taxable income. Valuation allowances are established if needed to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities.
Fly To Fit also addresses net operating losses, stating that these losses will be carried forward to reduce taxable income in future years. However, due to uncertainty regarding the timing and valuation of any benefits associated with these net operating loss carryforwards, Fly To Fit has elected to recognize an allowance to account for them in the financial statements but has fully reserved it. Under current law, net operating losses may be carried forward indefinitely. This indicates a conservative approach to recognizing potential tax benefits, acknowledging the uncertainty inherent in future projections.