How does Bombs Away determine the fair value of Level 3 assets or liabilities?

According to Bombs Away's 2024 Franchise Disclosure Document, Level 3 assets or liabilities are those with unobservable inputs. The fair values of these financial instruments are determined using pricing models, discounted cash flows, or similar techniques. At least one significant model assumption or input is unobservable when using these methods.

In simpler terms, Level 3 assets are the most difficult to value because there isn't a clear market price or observable data to rely on. Bombs Away uses its own assumptions and models to estimate what these assets are worth. This could include things like projecting future cash flows and discounting them back to their present value.

For a prospective Bombs Away franchisee, it's important to understand that these valuations are estimates and could be subject to error. The accuracy of Level 3 asset valuations depends heavily on the quality of the assumptions and models used. It would be prudent to inquire with Bombs Away about the specific types of Level 3 assets or liabilities they hold and the methods they use to determine their fair value. Understanding these methods can provide insight into the financial health and reporting practices of the franchisor.