According to Learningrx, what does deferred income taxes represent?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
horized, issued, and outstanding | 50,000 | 50,000 | | |---|---|---|---| | Retained earnings | 942,514 | 773,206 | | | Total Stockholders' Equity | 992,514 | 823,206 | | | Total Liabilities and Stockholders' Equity | $ 1,433,773 | | $ 1,193,151 |
3. Income Taxes
Current taxes are computed using the cash basis of accounting. Current taxable net income (loss) prior to the use of net operating losses, was $235,000 and $14,689 for the years ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the Corporation has federal net operating losses (NOL) to be carried to future yea
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
According to Learningrx's 2025 Franchise Disclosure Document, deferred income taxes represent the future tax benefit to be reported using the accrual basis of accounting, the difference in methods of depreciation, and net operating loss carry forwards. This means that Learningrx accounts for income taxes by considering the future tax implications of current transactions and events. This arises because Learningrx uses different accounting methods for tax purposes (cash basis) and financial reporting (accrual basis).
For a prospective Learningrx franchisee, understanding deferred income taxes is crucial for interpreting the company's financial statements. It provides insight into how the company manages its tax obligations and potential future tax benefits. The net operating loss (NOL) carry forwards, which are included in deferred income taxes, can be used to reduce future taxable income, potentially lowering Learningrx's tax liability in subsequent years.
The FDD indicates that Learningrx had federal net operating losses (NOL) to be carried to future years of approximately $930,000 and $1,165,000 for the years ended September 30, 2024 and 2023, respectively. These NOL carry forwards contribute to the deferred income tax assets. Monitoring these figures helps assess the financial health and tax planning strategies of Learningrx. Franchisees should consult with a financial advisor to fully understand the implications of deferred income taxes and NOL carry forwards on their investment.