Baskin Robbins 2011 Annual Report Download - page 111

During fiscal year 2011, the Company recognized deferred tax expense of $1.9 million due to enacted changes in
future state income tax rates. During fiscal year 2010, the Company recognized a deferred tax benefit of
$5.7 million, due to changes in the estimated apportionment of income among the states in which the Company
earns income and enacted changes in future state income tax rates. These changes in estimates and enacted tax rates
affect the tax rate expected to be in effect in future periods when the deferred tax assets and liabilities reverse.
The components of deferred tax assets and liabilities were as follows (in thousands):
December 31, 2011 December 25, 2010
Deferred tax
assets
Deferred tax
liabilities
Deferred tax
assets
Deferred tax
liabilities
Current:
Allowance for doubtful accounts .................. $ 1,114 — 1,774 —
Deferred gift cards and certificates ................ 23,312 — 2,544 —
Rent ........................................ 4,811 — 2,147 —
Deferred revenue .............................. 4,555 — 7,757 —
Accrued expenses .............................. 6,685 — 3,142 —
Capital loss ................................... 18,876 — — —
Other ........................................ 1,614 — 998 —
60,967 — 18,362 —
Valuation allowance ............................ (12,580) — (5,792) —
Total current .............................. 48,387 — 12,570 —
Noncurrent:
Capital leases ................................. 1,970 — 492 —
Rent ........................................ 1,767 — 1,465 —
Property and equipment ......................... — 14,106 — 11,992
Deferred compensation and long-term incentive
accrual .................................... 4,048 — 1,825 —
Deferred revenue .............................. 5,417 — 7,833 —
Real estate reserves ............................ 1,495 — 1,669 —
Franchise rights and other intangibles .............. — 588,761 — 600,481
Unused foreign tax credits ....................... 8,459 — — —
Capital loss ................................... — — 18,876 —
Other ........................................ 7,347 — 7,060 —
30,503 602,867 39,220 612,473
Valuation allowance ............................ (6,296) — (13,084) —
Total noncurrent ........................... 24,207 602,867 26,136 612,473
$ 72,594 602,867 38,706 612,473
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable
income, and projections for future taxable income over the periods for which the deferred tax assets are
deductible, management believes, as of December 31, 2011, it is more likely than not that the Company will
realize the benefits of the deferred tax assets, except as discussed below.
As of December 31, 2011 and December 25, 2010, the valuation allowance for deferred tax assets was
$18.9 million. These valuation allowance amounts relate to deferred tax assets for capital loss carryforwards and
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