According to Aplus, what is the definition of an asset's fair value?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
We use fair value measurements to measure, among other items, purchased assets, investments, leases and derivative contracts. We also use them to assess impairment of properties, equipment, intangible assets and goodwill. An asset's fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair value is based on observable market prices or parameters, or is derived from such prices or parameters. Where observable prices or inputs are not available, unobservable prices or inputs are used to estimate the current fair value, often using an internal valuation model. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the item being valued.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, the company uses fair value measurements to assess items such as purchased assets, investments, leases and derivative contracts, and to assess impairment of properties, equipment, intangible assets, and goodwill. Aplus defines an asset's fair value as the price at which that asset could be exchanged in a current transaction between knowledgeable, willing parties.
For liabilities, fair value is defined as the amount that would be paid to transfer the liability to a new obligor, rather than the amount to settle the liability with the creditor. Where possible, Aplus bases fair value on observable market prices or parameters, or derives it from such prices or parameters.
When observable prices or inputs are unavailable, Aplus uses unobservable prices or inputs to estimate the current fair value, often using an internal valuation model. These valuation techniques involve some level of management estimation and judgment, depending on the item being valued. This means that the reported value of certain assets could be subjective and based on internal assessments, which may not reflect the actual market value.