Baskin Robbins 2012 Annual Report Download - page 94

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The components of deferred tax assets and liabilities were as follows (in thousands):
December 29, 2012 December 31, 2011
Deferred tax
assets
Deferred tax
liabilities
Deferred tax
assets
Deferred tax
liabilities
Current:
Allowance for doubtful accounts $ 969 — 1,114 —
Deferred gift cards and certificates 22,561 — 23,312 —
Rent 4,990 — 4,811 —
Deferred income 3,926 — 4,555 —
Other current liabilities 11,422 — 6,685 —
Capital loss — — 18,876 —
Other 3,395 — 1,614 —
47,263 — 60,967 —
Valuation allowance ——
(12,580)—
Total current 47,263 — 48,387 —
Noncurrent:
Capital leases 2,924 — 1,970 —
Rent 2,032 — 1,767 —
Property and equipment — 10,229 — 14,106
Deferred compensation liabilities 6,478 — 4,048 —
Deferred income 4,905 — 5,417 —
Real estate reserves 1,398 — 1,495 —
Franchise rights and other intangibles — 584,642 — 588,761
Unused foreign tax credits 8,034 — 8,459 —
Other — 26 7,347 —
25,771 594,897 30,503 602,867
Valuation allowance ——
(6,296)—
Total noncurrent 25,771 594,897 24,207 602,867
$ 73,034 594,897 72,594 602,867
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 29, 2012, it is more likely than
not that the Company will realize the benefits of the deferred tax assets.
At December 31, 2011, the valuation allowance for deferred tax assets was $18.9 million. This valuation allowance related to
deferred tax assets for capital loss carryforwards that expired in 2012. The Company used a portion of the capital loss
carryforward to offset a taxable intercompany capital gain and a portion expired. Recognition of this taxable intercompany gain
and the related benefit resulting from the reversal of the valuation allowance is deferred for financial reporting purposes. Due to
the valuation allowance on the capital loss carryforward, the portion that expired did not impact the consolidated statements of
operations. Both the deferred tax asset for the capital loss carryforward and the valuation allowance were reversed in fiscal year
2012.
The Company has not recognized a deferred tax liability of $7.2 million for the undistributed earnings of foreign operations, net
of foreign tax credits, relating to our foreign joint ventures that arose in fiscal year 2012 and prior years because the Company
currently does not expect those unremitted earnings to reverse and become taxable to the Company in the foreseeable future. A
deferred tax liability will be recognized when the Company is no longer able to demonstrate that it plans to permanently
reinvest undistributed earnings. As of December 29, 2012 and December 31, 2011, the undistributed earnings of these joint
ventures were approximately $123.3 million and $108.2 million, respectively.