What is the deferred tax asset for Itan for the year ending December 31, 2022?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
he opening of ten to twenty salons over ten years. This amount is to be recognized on a straight-line basis over the course of the ten year ADA. For the years ended December 31, 2023 and 2022 there have been no allocations towards revenue on the statements of earnings.
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NOTE 9 INCOME TAXES
Income tax expense is calculated as follows:
| 2023 | 2022 | |||
|---|---|---|---|---|
| Current taxes: | ||||
| Federal | $ | 64,194 | $ 51,157 | |
| State | 32,905 97,099 | 25,590 76,747 | ||
| Deferred taxes: | ||||
| Federal | 1,772 | 27, |
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, the deferred tax asset for the year ending December 31, 2022, was $4,661. This asset, along with the deferred tax liability, arises because Itan's tax return uses the cash basis of accounting, and there are differences between tax and GAAP (Generally Accepted Accounting Principles) depreciation methods.
Deferred tax assets typically represent future tax benefits that will arise due to temporary differences between the book (financial statement) value of an asset or liability and its tax basis. In simpler terms, it means Itan has already paid or accrued taxes that are higher than what is currently due based on their accounting practices. This can occur due to timing differences in recognizing revenue or expenses for accounting versus tax purposes.
For a prospective Itan franchisee, understanding deferred tax assets and liabilities is crucial for assessing the company's financial health. While a deferred tax asset can be a positive indicator, it's important to consider the reasons behind it and whether the franchisee's own operations will generate similar tax benefits. Consulting with a financial advisor is recommended to fully understand the implications of these deferred tax items.