A change in __________ or its application is appropriate if the change results in a measurement that is equally or more representative of fair value in the circumstances.
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A. B. C. D.A
The correct answer is A. Valuation technique.
Fair value is the estimated price at which an asset or liability would exchange in an orderly transaction between market participants at the measurement date. Valuation techniques are used to estimate fair value, which may include the use of market-based or income-based approaches.
Valuation techniques should be applied consistently over time and should be appropriate for the circumstances in which they are used. If a change in the valuation technique or its application results in a measurement that is equally or more representative of fair value, then the change is appropriate.
For example, if a company uses the market approach to value its inventory, but there is no active market for the inventory, it may need to switch to the cost approach to determine the fair value of the inventory. The cost approach involves determining the cost to produce or replace the inventory, and would be more representative of fair value in the circumstances where there is no active market for the inventory.
In summary, when determining fair value, it is important to use appropriate valuation techniques that are consistent with industry standards and the circumstances in which they are being applied. If a change in the valuation technique or its application results in a measurement that is equally or more representative of fair value, then the change is appropriate.