What characterizes Level 3 fair value measurements for Surestay Hotel By Best Western?
Surestay_Hotel_By_Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
- Level 1 quoted prices for identical instruments in active markets;
- Level 2 quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
- Level 3 fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Source: Item 23 — Receipts (FDD pages 88–286)
What This Means (2025 FDD)
According to Surestay Hotel By Best Western's 2025 Franchise Disclosure Document, Level 3 fair value measurements are defined by the inputs used in their calculation. Specifically, these measurements are derived from valuation techniques where one or more significant inputs or value drivers are unobservable. This means that the values are based on internal data or estimations rather than direct market data.
For a potential Surestay Hotel By Best Western franchisee, this is relevant in understanding how the company values certain assets and liabilities. The use of Level 3 measurements indicates a degree of subjectivity and estimation in the financial reporting. It is important to note that the company uses standardized procedures for all assets and liabilities that require fair value measurement.
While the document specifies that the company has not elected the fair value option for any eligible financial instruments, it does utilize fair value measurements for investments in a trust. These investments are measured using Level 1 inputs, which are quoted prices for identical assets in active markets, representing a more transparent valuation method compared to Level 3. Prospective franchisees may want to inquire about the specific assets or liabilities that are subject to Level 3 fair value measurements to fully understand the company's valuation practices.