Sprouts Farmers Market 2015 Annual Report Download - page 91

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Deferred Taxes
Significant components of the Company’s deferred tax assets and deferred tax liabilities are as
follows:
As Of
January 3,
2016
December 28,
2014
Deferred tax assets
Employee benefits ......................................... $20,298 $17,930
Net operating loss carryforwards and tax
credits ......................................................... 409 3,282
Lease related ................................................. 80,172 81,014
Other accrued liabilities ................................. 8,070 7,028
Charitable contribution carryforward.............. 14,574 8,889
Inventories and other ..................................... 1,202 1,073
Total gross deferred tax assets ................ 124,725 119,216
Deferred tax liabilities
Depreciation and amortization ....................... (111,402)(97,731)
Intangible assets............................................ (11,377)(4,020)
Other .............................................................. (546)(485)
Total gross deferred tax liabilities ............. (123,325)(102,236)
Net deferred tax asset............................... $1,400 $16,980
A valuation allowance is established for deferred tax assets if it is more likely than not that these
items will either expire before the Company is able to realize their benefits, or that the realization of future
deductions is uncertain.
Management performs an assessment over future taxable income to analyze 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. The Company has evaluated all
available positive and negative evidence and believes it is probable that the deferred tax assets will be
realized and has not recorded a valuation allowance against the Company’s deferred tax assets as of
January 3, 2016 and December 28, 2014.
At December 28, 2014, the Company had approximately $5.7 million of federal net operating loss
carryforwards that were fully utilized in 2015. The Company had net operating loss carryforwards for state
income tax purposes of $4.2 million as of December 28, 2014 that were fully utilized in 2015. The
Company had alternative minimum tax credits of $0.9 million as of December 28, 2014 that were fully
utilized in 2015. The Company had general business credits of $1.5 million as of December 28, 2014 that
were fully utilized in 2015. The company has state income tax credits of $0.4 million which are available
to offset future state income taxes until 2023 through 2024.
In September 2013 the Internal Revenue Service issued final regulations related to tangible
property, which govern when a taxpayer must capitalize or deduct expenses for acquiring, maintaining,
repairing and replacing tangible property. The regulations are effective for tax years beginning January 1,
2014, however early adoption is permitted. The Company adopted the regulations for the tax year
beginning December 30, 2013. The Company has analyzed the impacts of the tangible property
regulations and has determined they are in compliance with the regulations.
The Company applies the authoritative accounting guidance under ASC 740 for the recognition,
measurement, classification and disclosure of uncertain tax positions taken or expected to be taken in a
tax return.