What inputs are considered Level 2 for Chocolate Bash's assets or liabilities?

According to Chocolate Bash's 2024 Franchise Disclosure Document, Level 2 inputs for fair value assessment are those other than quoted prices within Level 1. These Level 2 inputs are observable for the asset or liability, either directly or indirectly. Examples include 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.

This means that Chocolate Bash uses market-based information, where available, to determine the fair value of its assets and liabilities. However, unlike Level 1 which relies on direct prices for identical items in active markets, Level 2 uses prices of comparable items or prices from less active markets. This approach is common when the exact asset or liability is not actively traded, but similar benchmarks exist.

For a prospective Chocolate Bash franchisee, understanding these valuation levels is important for interpreting the financial statements. It provides insight into how the company assesses the value of its financial instruments and the reliability of those valuations. Level 2 valuations are generally considered more subjective than Level 1 but still rely on observable market data, making them more reliable than Level 3 valuations which depend on unobservable inputs.