How does Bw Premier Collection define Level 3 fair value measurements for financial instruments?

According to Bw Premier Collection's 2025 Franchise Disclosure Document, Level 3 fair value measurements are defined as those "derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable." This definition is part of a broader framework Bw Premier Collection uses to measure the fair value of its financial assets and liabilities. The company uses standardized procedures for assets and liabilities that must be measured at estimated fair value, whether on a recurring or non-recurring basis.

Bw Premier Collection utilizes a hierarchy of valuation techniques to determine fair value, categorized into three levels. Level 1 relies on quoted prices for identical instruments in active markets, representing the most transparent and reliable valuation method. Level 2 incorporates quoted prices for similar instruments, prices in less active markets, and model-derived valuations with observable inputs. Level 3, however, involves valuation techniques with unobservable inputs, indicating a higher degree of subjectivity and reliance on Bw Premier Collection's own assumptions.

For a prospective franchisee, understanding these definitions is crucial because it sheds light on how Bw Premier Collection values its financial instruments and the level of subjectivity involved. While the company aims to use observable market data when available, Level 3 measurements suggest that some assets or liabilities are valued using internal assumptions, which could be subject to change and may impact the company's financial position. It's important to note that Bw Premier Collection has not elected the fair value option for any eligible financial instruments, and investments in the Trust are designated as trading securities carried at fair value using Level 1 inputs.