Does Craters & Freighters hold any investments using Level 3 inputs?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
ASC 820, "Fair Value Measurement," provides a framework for measuring fair value of certain assets and liabilities and enhanced disclosures about how the fair value was determined based on the significant levels of inputs used to determine the fair value as follows:
- Level 1 Inputs: Quoted prices in active markets for identical assets or liabilities.
- Level 2 Inputs: Quoted prices in active markets for similar assets or liabilities and other external inputs that are observable.
- Level 3 Inputs: Unobservable inputs in which there is little or no market data, which requires the entity to develop it's own assumptions.
The Company's investments in stocks, mutual funds, and exchange traded funds are valued using Level 1 inputs. The Company does not hold any investments using Level 2 or 3 inputs. There were no changes in the valuation methodology from the prior year.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to the 2025 FDD, Craters & Freighters does not hold any investments using Level 2 or Level 3 inputs. Instead, the company's investments in stocks, mutual funds, and exchange traded funds are valued using Level 1 inputs, which are quoted prices in active markets for identical assets or liabilities.
ASC 820, "Fair Value Measurement," provides a framework for measuring fair value based on the significant levels of inputs used to determine fair value. Level 3 inputs are unobservable inputs where there is little to no market data, requiring the entity to develop its own assumptions. The fact that Craters & Freighters does not use Level 3 inputs suggests that its investments are relatively liquid and have readily available market values.
For a prospective franchisee, this information indicates that Craters & Freighters maintains a conservative approach to valuing its investments, relying on observable market data rather than subjective assumptions. This may provide some reassurance about the financial management practices of the company.