For Focalpoint Coaching, under what condition are deferred tax assets recognized?
Focalpoint_Coaching Franchise · 2025 FDDAnswer from 2025 FDD Document
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Note 1. Nature of Business and Significant Accounting Policies (continued)
Use of estimates and significant judgments (continued)
The Company is subject to the United States corporation tax and judgment is required in determining the provision for income and deferred taxation. The Company recognizes taxation assets and liabilities based upon estimates and assessments of many factors including judgments about the outcome of future events. Deferred tax assets are only recognized to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. At December 31, 2024 the Company has recognized a deferred tax liability consisting of the tax effect of timing differences in respect of the excess of taxation allowances over depreciation upon fixed assets, and va
Source: Item 21 — Financial Statements (FDD page 56)
What This Means (2025 FDD)
According to Focalpoint Coaching's 2025 Franchise Disclosure Document, the company recognizes deferred tax assets under specific conditions related to their recoverability. Deferred tax assets are recognized only to the extent that it is probable they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
This means that Focalpoint Coaching only records a deferred tax asset if it is likely that the company will be able to use the asset in the future to reduce its tax obligations. This assessment is based on expectations about future financial performance and tax liabilities. For example, at December 31, 2024, the company recognized a deferred tax liability consisting of the tax effect of timing differences in respect of the excess of taxation allowances over depreciation upon fixed assets, and various prepaid/accrued amounts for December 31, 2024 and 2023 of $0 and $18,400, respectively, on the basis that the company is in a tax paying position.
For a prospective Focalpoint Coaching franchisee, this accounting policy indicates that the company takes a conservative approach to recognizing tax benefits, which can provide a more realistic view of its financial position. Understanding this policy can help franchisees better interpret Focalpoint Coaching's financial statements and assess the company's financial health. It is important to note that the recognition of deferred tax assets is subject to management's judgment and estimates about future events, which can change over time.