For Clean Your Dirty Face, what valuation techniques are used to determine fair value?
Clean_Your_Dirty_Face Franchise · 2025 FDDAnswer from 2025 FDD Document
The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used to maximize the use of observable inputs and minimize the use of unobservable measurements.
The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2024 and 2023.
Money market funds: Valued at the closing price reported on an actively traded exchange and are reported as level 1.
The preceding method described may produce fair value calculations that may not be indicative of net realizable value or reflective of future values. Furthermore, although the Company believes its valuation is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value could result in a different fair value measurement at the reporting date.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 54)
What This Means (2025 FDD)
According to Clean Your Dirty Face's 2025 Franchise Disclosure Document, the company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable measurements to determine fair value. The FDD outlines a three-level hierarchy for fair value measurements, as defined by FASB ASC Topic 820.
Level 1 measurements rely on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 measurements consider quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets in inactive markets, observable inputs other than quoted prices, and inputs derived from or corroborated by observable data. Level 3 measurements use unobservable inputs that are significant to the fair value measurement.
For example, Clean Your Dirty Face values its money market funds at the closing price reported on an actively traded exchange, categorizing them as Level 1 assets. The company believes its valuation methods are appropriate and consistent with market practices. However, the FDD notes that using different methodologies or assumptions could result in different fair value measurements. This is a standard accounting practice, and prospective franchisees are not likely to be directly involved in these valuations.