What are Level 1 inputs, as defined by Aunt Millies Bakeries in the context of fair value hierarchy?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
o effect on net income or stockholders' equity.
Subsequent Events: Management has performed an analysis of the activities and transactions subsequent to September 30, 2024 to determine the need for any adjustments to and/or disclosures within the consolidated financial statements for the year ended September 30, 2024.
Management has performed their analysis through January 31, 2025, the date the consolidated financial statements were available to be issued.
NOTE 2 - MARKETABLE SECURITIES
For purposes of valuing marketable securities, the Company follows guidance of ASC 820 Fair Value Measurement which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This requirement establishes a fair value hierarchy regarding the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. This requirement establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The requirement describes three levels of inputs that may be used to measure fair
The three levels of fair value hierarchy are described as follows:
- Level 1 Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, when valuing marketable securities, the company adheres to ASC 820 Fair Value Measurement, which defines fair value and establishes a hierarchy for its measurement. This hierarchy prioritizes observable inputs and minimizes unobservable inputs. The FDD describes three levels of inputs for measuring fair value. Level 1 inputs are defined as quoted prices (unadjusted) for identical assets or liabilities in active markets that Aunt Millies Bakeries can access on the measurement date.
In simpler terms, Level 1 inputs are the most reliable and straightforward way to determine the fair value of an asset or liability. They are based on real-time prices from active markets, meaning there are many buyers and sellers, and transactions occur frequently. This makes it easy to get an accurate and objective valuation. For a prospective franchisee, understanding these definitions is crucial for interpreting Aunt Millies Bakeries' financial statements and assessing the value of its assets and liabilities.
The FDD states that all marketable securities are classified as available for sale and are carried at fair value, determined using Level 1 inputs. This indicates that Aunt Millies Bakeries relies on readily available market prices to value its investments in common stock and mutual funds. This approach enhances the transparency and reliability of the company's financial reporting. The investments consisted principally of common stock and mutual funds and had a cost of $67,400 at September 30, 2023 and 2022. Fair value approximated $67,400 at September 30, 2023 and 2022.
Prospective franchisees should be aware of how Aunt Millies Bakeries values its assets, as this can impact the overall financial health and stability of the company. Understanding the fair value hierarchy and the use of Level 1 inputs provides insight into the company's accounting practices and risk management strategies. This information can be valuable when making an informed decision about investing in an Aunt Millies Bakeries franchise.