What techniques are used to determine the fair values of Level 3 financial instruments for Bombs Away?

According to Bombs Away's 2024 Franchise Disclosure Document, Level 3 financial instruments are evaluated using unobservable inputs. Specifically, when fair values are determined, Bombs Away uses pricing models, discounted cash flows, or similar techniques. A financial instrument is classified as Level 3 when at least one significant model assumption or input is unobservable.

This means that Bombs Away relies on its own assumptions and judgment, rather than readily available market data, to value these particular financial instruments. This approach is used when there is a lack of transparent market prices or comparable transactions.

For a prospective franchisee, this indicates that understanding Bombs Away's financial assumptions and valuation methods is crucial. While the FDD provides an overview, further due diligence into these Level 3 valuations may be warranted to fully assess the company's financial health and stability. It is important to note that as of December 31, 2023, the carrying amounts of Bombs Away's financial assets and liabilities reported in the balance sheets approximate their fair value.