Fair quoted techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs.

The statement is a fundamental principle of fair value measurement as defined by authoritative accounting standards. The objective is to increase the consistency, comparability, and reliability of fair value estimates. This is achieved through the fair value hierarchy, which prioritizes inputs to valuation techniques. Level 1 inputs (quoted prices in active markets) are the most observable and reliable, while Level 3 inputs (unobservable data) are the least. Therefore, valuation techniques must be selected to maximize the use of relevant observable market data and minimize reliance on unobservable, entity-specific assumptions. This ensures the fair value measurement reflects a market participant's perspective.

B. False: This is incorrect. The statement accurately describes the core requirement for selecting valuation techniques under both U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

1. Financial Accounting Standards Board (FASB). Accounting Standards Codification (ASC) Topic 820

Fair Value Measurement. Section 820-10-35-41B. "Valuation techniques used to measure fair value shall maximize the use of relevant observable inputs and minimize the use of unobservable inputs."

2. International Accounting Standards Board (IASB). International Financial Reporting Standard (IFRS) 13

Fair Value Measurement. Paragraph 67. "Valuation techniques used to measure fair value shall maximise the use of relevant observable inputs and minimise the use of unobservable inputs."

3. Laux

C.

& Leuz

C. (2009). The crisis of fair-value accounting: Making sense of the recent debate. Accounting

Organizations and Society

34(6-7)

826-834. In its discussion of the fair value hierarchy (p. 828)

the paper notes the framework's explicit preference for market-based

observable inputs over internal models with unobservable inputs. https://doi.org/10.1016/j.aos.2009.04.003

4. Columbia Business School. (2022). Course B8006: Financial Statement Analysis and Valuation

Lecture 3: Fair Value Accounting. Slide 11. The lecture notes explicitly state the principle: "Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs."