Question

Which method of measuring the fair value of a performance obligation is dependent on the standalone selling prices of other goods or services promised in the contract?

1) Cost approach
2) Market approach
3) Income approach
4) None of the above

Answer 1

The market approach is the method of measuring the fair value of a performance obligation that relies on the standalone selling prices of other goods or services.

Step-by-step explanation:

The method of measuring the fair value of a performance obligation that is dependent on the standalone selling prices of other goods or services promised in the contract is known as the market approach. This approach uses prices and other relevant information generated by market transactions involving identical or comparable goods or services to gauge the fair value. The cost approach and income approach are not directly related to the standalone selling prices of other goods or services, whereas the market approach considers what customers in the market would pay for similar goods or services.