What are some examples of Level 2 inputs used in Sonesta Simply Suites' financial statements?
Sonesta_Simply_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
Applicable accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). We measure our assets and liabilities using inputs from the following three levels of the fair value hierarchy:
- Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.
- Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
- Level 3 includes unobservable inputs that reflect assumptions about what factors market participants would use in pricing the asset or liability. We develop these inputs based on the best information available, including our own data.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Sonesta Simply Suites' 2025 Franchise Disclosure Document, Level 2 inputs are used in fair value measurements. Level 2 inputs include quoted prices for similar assets and liabilities in active markets. They also include quoted prices for identical or similar assets or liabilities in markets that are not active.
Other Level 2 inputs are those other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves. Additionally, Level 2 inputs are those that are derived principally from or corroborated by observable market data by correlation or other means, also known as market corroborated inputs.
These inputs are part of a three-level hierarchy used to determine the fair value of assets and liabilities on Sonesta Simply Suites' financial statements. This hierarchy prioritizes observable market data when available, but also allows for the use of similar asset data and corroborated market information when direct prices are not accessible.