How does Amerispec Inspection Services determine the fair value of Class B Units?
Amerispec_Inspection_Services Franchise · 2025 FDDAnswer from 2025 FDD Document
Certain Class B Units were granted during the period ended December 31, 2023. The fair value is determined as of the grant date using significant unobservable inputs (see Note 11) and is categorized as Level 3. There were no Class B Units granted during the year ended December 31, 2024.
Share-Based Compensation
Certain of the Company's employees are party to a share-based compensation arrangement established by TCB Services Management, LLC, an affiliate of the Company, as approved by the Board of Managers. Management accounts for the awards granted to employees in accordance with ASC 718 Compensation - Stock Compensation, which requires compensation cost related to share-based payments, classified as equity awards, to be measured based on the grant date fair value of the award. The Company recognizes compensation cost over the requisite service period. The Company's accounting policy is to recognize forfeitures as they occur.
Leases
Source: Item 23 — Receipts (FDD pages 47–172)
What This Means (2025 FDD)
According to Amerispec Inspection Services's 2025 Franchise Disclosure Document, the fair value of Class B Units is determined using significant unobservable inputs as of the grant date and is categorized as Level 3. This valuation method was used for Class B Units granted during the period ended December 31, 2023. No Class B Units were granted during the year ended December 31, 2024.
The document defines three levels of inputs for determining fair value. Level 1 relies on observable inputs like quoted prices in active markets. Level 2 uses inputs other than quoted prices in active markets that are either directly or indirectly observable. Level 3, which is used for Class B Units, relies on unobservable inputs where little or no market data exists, requiring Amerispec Inspection Services to develop its own assumptions.
The classification of financial instruments is based on the lowest level of input that is significant to the fair value measurement. Amerispec Inspection Services's assessment of the significance of a particular input requires judgment, which may affect the valuation of fair value financial instruments and their placement within these hierarchy levels. This means that the valuation of Class B Units is highly dependent on internal assumptions and could be subject to variability and potential challenges in substantiating the determined fair value.