What are Level 3 significant unobservable inputs based on Aunt Millies Bakeries' own assumptions?

According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, Level 3 inputs for fair value measurement are defined as significant unobservable inputs that reflect the company's own assumptions about what market participants would use when pricing an asset or liability. This definition is part of a broader framework for valuing marketable securities under ASC 820, which prioritizes observable inputs and minimizes unobservable inputs.

In simpler terms, Level 3 inputs are the company's best guesses or internal estimates about how much an asset is worth when there isn't clear market data available. These assumptions are subjective and based on Aunt Millies Bakeries' own judgment rather than on what's happening in the broader market. This approach is used when valuing marketable securities, such as stocks and mutual funds, held by the company.

For a prospective franchisee, understanding these definitions is important because it sheds light on how Aunt Millies Bakeries values its assets and liabilities. While the FDD does not provide specific examples of Level 3 inputs used by Aunt Millies Bakeries, it's important to recognize that these inputs are based on internal assumptions and may not always align with market realities. This could impact the franchisee's understanding of the company's financial health and stability, as these valuations can influence financial statements and overall performance assessments.