In the context of Bombs Away's financial reporting, what kind of inputs are considered Level 2?

According to Bombs Away's 2024 Franchise Disclosure Document, Level 2 inputs in financial reporting are those other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. This includes quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active.

In simpler terms, Level 2 inputs are based on market data but are not direct, real-time prices for the exact same item. Instead, they might be prices of comparable items or prices in less liquid markets. This is a step down from Level 1, which uses the most reliable data (actual prices in active markets), but still relies on observable market information.

For a prospective Bombs Away franchisee, understanding these levels is important for assessing the fair value of financial instruments held by the company. While the franchisee may not be directly involved in this valuation, it provides insight into how Bombs Away assesses and reports the value of its assets and liabilities, which can impact the overall financial health of the franchise system.