Why have the deferred tax assets for Ledgers not been reduced by a valuation allowance?
Ledgers Franchise · 2025 FDDAnswer from 2025 FDD Document
| 022 | |||
|---|---|---|---|
| Deferred tax (benefit): | |||
| Federal | $ (86,000) | $ (80,000) | $ (126,000) |
| State | (18,000) | (18,000) | (27,000) |
| (104,000) | (98,000) | (153,000) | |
| Expense (benefit) from income taxes | $ (104,0 |
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to Ledgers' 2025 Franchise Disclosure Document, the company's deferred tax assets, which relate to net operating loss carryforwards, have not been reduced by a valuation allowance. As of December 31, 2024, these net operating losses approximate $2,900,000.
Ledgers' management believes that all deferred tax assets will be realized in future periods before they expire. This indicates that Ledgers anticipates generating sufficient taxable income in the future to utilize these loss carryforwards, thereby justifying the recognition of the deferred tax assets without a reduction for potential non-realization.
For a prospective franchisee, this suggests that Ledgers' financial projections indicate a strong likelihood of future profitability. However, it's important to note that the realization of deferred tax assets depends on Ledgers' future financial performance, which can be influenced by various factors, including economic conditions and market competition. A potential franchisee should independently verify these projections and assess the risks associated with the realization of these tax assets.