Baskin Robbins 2015 Annual Report Download - page 96

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During fiscal year 2014, the Company recorded a net tax benefit of $7.0 million related to the reversal of reserves for uncertain
tax positions, including interest and penalties, net of federal and state tax benefit as applicable, for which settlement with the
taxing authorities was reached or were otherwise deemed effectively settled. Additionally during fiscal year 2014, the Company
recorded a net tax benefit of $8.5 million related to the restructuring of our Canadian subsidiaries, which included a legal entity
conversion of Dunkin’ Brands Canada, Ltd. (“DBCL”) to a British Columbia unlimited liability company. The net tax benefit
from the Canadian legal entity conversion resulted primarily from a worthless securities deduction for the tax basis of DBCL
and the revaluation of DBCL’s deferred tax assets and liabilities at the applicable U.S. deferred tax rate, partially offset by
income recognized for the tax basis of DBCL’s assets.
During fiscal year 2013, the Company recorded a net tax benefit of $8.4 million related to the reversal of reserves for uncertain
tax positions, including interest and penalties, net of federal and state tax benefit as applicable, for which settlement with the
taxing authorities was reached, and recognized a deferred tax expense of $1.7 million due to estimated changes in
apportionment and enacted changes in future state income tax rates.
The components of deferred tax assets and liabilities were as follows (in thousands):
December 26, 2015 December 27, 2014
Deferred tax
assets
Deferred tax
liabilities
Deferred tax
assets(1) Deferred tax liabilities(1)
Allowance for doubtful accounts $ 4,484 — 3,377 —
Capital leases 3,256 — 3,066 —
Rent 10,132 — 8,922 —
Property and equipment 419 — — 4,451
Deferred compensation liabilities 15,155 — 10,645 —
Deferred gift cards and certificates 20,909 — 20,549 —
Deferred income 12,064 — 10,311 —
Real estate reserves 1,060 — 1,223 —
Franchise rights and other intangibles — 559,332 — 567,751
Unused net operating losses and foreign tax credits 14,233 — 10,444 —
Other current liabilities 7,708 — 13,033 —
Capital loss 162 — 179 —
Other — 337 780 768
89,582 559,669 82,529 572,970
Valuation allowance (793)—
(682)—
Total $ 88,789 559,669 81,847 572,970
(1) As a result of the retrospective adoption of recent accounting guidance to simplify the presentation of deferred income taxes (see note 2),
current deferred income tax assets as of December 27, 2014 were reclassified from current to noncurrent to conform to current period
presentation.
At December 26, 2015, the Company had $10.7 million of unused foreign tax credits, which expire in fiscal years 2021, 2024,
and 2025. At December 26, 2015, the Company had net operating loss carryforwards in certain international jurisdictions of
approximately $7.4 million, and recorded a deferred tax asset of $1.4 million, net of valuation allowance, related to such loss
carryforwards.
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 26, 2015, with the exception of
net operating loss carryforwards attributable to our subsidiaries in Spain and the United Kingdom, it is more likely than not that
the Company will realize the benefits of the deferred tax assets.
The Company has not recognized a deferred tax liability of $6.6 million for the undistributed earnings of foreign operations, net
of foreign tax credits, relating to our foreign joint ventures that arose in fiscal year 2015 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