FRANKLIN COVEY CO Fair Value Disclosure
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting standards related to fair value measurements include a hierarchy for information and valuations used in measuring fair value that is broken down into the following three levels based on reliability:
Level 1 valuations are based on quoted prices in active markets for identical instruments that we can access at the measurement date.
Level 2 valuations are based on inputs other than quoted prices included in Level 1 that are observable for the instrument, either directly or indirectly, for substantially the full term of the asset or liability including the following:
a.quoted prices for similar, but not identical, instruments in active markets;
b.quoted prices for identical or similar instruments in markets that are not active;
c.inputs other than quoted prices that are observable for the instrument; or
d.inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.
The book values of our financial instruments at August 31, 2025 and 2024 approximated their fair values. The assessment of the fair values of our financial instruments is based on a variety of factors and assumptions. Accordingly, the fair values may not represent the actual values of the financial instruments that could have been realized at August 31, 2025 or 2024, or that will be realized in the future, and do not include expenses that could be incurred in an actual sale or settlement. The following methods and assumptions were used to determine the fair values of our financial instruments, none of which were held for trading or speculative purposes.
Cash, Cash Equivalents, and Accounts Receivable – The carrying amounts of cash, cash equivalents, and accounts receivable approximate their fair values due to the liquidity and short-term maturity of these instruments.
Other Assets – Our other assets, including notes receivable, were recorded at the net realizable value of estimated future cash flows from these instruments.
Debt Obligations – At August 31, 2025, our debt consisted primarily of a note payable to the former owners of Strive. Our revolving line of credit is a negotiated component of our 2023 Credit Agreement (Note 5). Since the interest rate for any obligation on our 2023 Credit Agreement is variable, the applicable interest rates and other conditions related to the revolving line of credit are reflective of current market conditions, and the carrying value of term loan and revolving line of credit (when applicable) obligations therefore approximate their fair value.
Contingent Consideration Liabilities from Business Acquisitions
The acquisition price of Jhana Education (Jhana), which was completed in fiscal 2017, included potential contingent consideration of up to $7.2 million through a specified measurement period, which lasted through July 2026. However, the contingent consideration metrics were met prior to the end of the measurement period, and we made the final contingent payments in fiscal 2023, which totaled $0.7 million. We measured the fair value of this contingent consideration liability at each reporting date based on a Monte Carlo simulation model. The fair value of the Jhana contingent consideration was a Level 3 measurement because we estimated consolidated Company and AAP sales over the measurement period. Changes to the fair value of the contingent consideration liabilities were recorded in selling, general, and administrative expenses in the accompanying consolidated income statements and statements of comprehensive income in the period of adjustment.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 12, 2025 | Showing above |
| 2024 | Nov 12, 2024 | |
| 2023 | Nov 13, 2023 | |
| 2022 | Nov 14, 2022 | |
| 2021 | Nov 12, 2021 | |
| 2020 | Nov 16, 2020 | |
| 2019 | Nov 14, 2019 | |
| 2018 | Nov 14, 2018 | |
| 2017 | Nov 14, 2017 | |
| 2016 | Nov 14, 2016 | |
| 2015 | Nov 13, 2015 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.