How does Budget classify Level 1 financial assets and liabilities for fair value measurements?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
We measure the fair value of assets and liabilities and disclose the source for such fair value measurements. Financial assets and liabilities are classified as follows: Level 1, which refers to assets and ver measure the fair value of assets and habilities and discounter for such fair value measurements. Financial assets and habilities are classified as follows. Level 1, which refers to assets and habilities for which significant other observable markets for identical assets or liabilities; Level 2, which refers to assets and habilities for which significant other observable market inputs are readily available; and Level 3, which are valued based on significant unobservable inputs.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the company categorizes financial assets and liabilities into three levels based on the observability of market inputs used in their fair value measurements. Level 1 assets and liabilities are those for which significant other observable markets for identical assets or liabilities are readily available.
In simpler terms, Level 1 assets and liabilities are those whose fair values can be easily determined by looking at prices in active markets. This typically includes instruments traded on national securities exchanges or over-the-counter markets. The availability of quoted market prices makes these valuations the most transparent and reliable.
For a prospective Budget franchisee, understanding these classifications is important for interpreting Budget's financial statements. It provides insight into how the company values its assets and liabilities, with Level 1 items representing the most straightforward and market-validated valuations. This can be useful in assessing the overall financial health and stability of Budget.