When making a fair value measurement,management of the entity should strive to maximize ________ while minimizing _________.
A) Observable inputs; market value
B) Transaction costs; transport costs
C) Observable inputs; unobservable inputs
D) Sufficient data; transaction costs

Question

Quizplus · Accepted Answer

When making a fair value measurement, management of the entity should strive to maximize the use of observable inputs while minimizing the use of unobservable inputs. Observable inputs are considered more reliable and objective in measuring the fair value of an asset or liability, while unobservable inputs are more subjective and open to management bias. Therefore, using observable inputs will increase the reliability and objectivity of the fair value measurement. On the other hand, minimizing the use of unobservable inputs will reduce the potential for management bias and increase the comparability of fair value measurements.

When Making a Fair Value Measurement,management of the Entity Should