For Aunt Millies Bakeries, what are examples of Level 2 significant observable inputs, other than Level 1 prices?

According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, when valuing marketable securities, the company uses a fair value hierarchy that prioritizes observable inputs and minimizes unobservable inputs. Level 2 inputs are defined as significant observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

For a prospective Aunt Millies Bakeries franchisee, understanding this hierarchy is crucial for interpreting the financial statements. Level 2 inputs provide a more reliable basis for valuation compared to unobservable inputs, but they are not as straightforward as Level 1 quoted prices from active markets. This means there is still some degree of estimation and judgment involved in determining fair value.

The distinction between these levels is important because it affects the reliability and transparency of the financial information presented. While the FDD excerpt defines Level 2 inputs, it does not provide specific examples of the types of assets or liabilities to which these valuation methods might be applied within Aunt Millies Bakeries' financial statements. A potential franchisee should seek clarification from Aunt Millie's Bakeries regarding which specific assets or liabilities are valued using Level 2 inputs to fully understand the company's valuation practices.