What are Level 1 inputs in Americas Best Value Inn's fair value hierarchy?
Americas_Best_Value_Inn Franchise · 2025 FDDAnswer from 2025 FDD Document
Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). We measure our assets and liabilities using inputs from the following three levels of the fair value hierarchy: • Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability
- to access at the measurement date. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). • Level 3 includes unobservable inputs that reflect assumptions about what factors market participants would use in
- pricing the asset or liability. We develop these inputs based on the best information available, including our own data.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 70–71)
What This Means (2025 FDD)
According to Americas Best Value Inn's 2025 Franchise Disclosure Document, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, also known as an exit price. To measure assets and liabilities, Americas Best Value Inn uses inputs from three levels of a fair value hierarchy.
Level 1 inputs consist of unadjusted quoted prices in active markets for identical assets or liabilities that Americas Best Value Inn has the ability to access at the measurement date. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3 includes unobservable inputs that reflect assumptions about what factors market participants would use in pricing the asset or liability.
Understanding these levels is crucial for prospective Americas Best Value Inn franchisees as it provides insight into how the company values its assets and liabilities. This can be particularly relevant when assessing the financial health and stability of the company. The categorization of inputs into these levels reflects the priority given to different types of market data, with Level 1 inputs considered the most reliable due to their direct observability and activity in the market.