Final answer:
The statement is true as the generally accepted accounting principle is that the items acquired or assumed in a business combination should be measured at their fair value according to ASC 820.
Step-by-step explanation:
The statement that items acquired or assumed in a business combination should generally be measured at fair value using the requirements of ASC 820, "Fair Value Measurement," is true. According to the Financial Accounting Standards Board (FASB) in the Generally Accepted Accounting Principles (GAAP), when one business acquires another, the assets acquired and liabilities assumed should be recognized at their fair value on the acquisition date. ASC 820 provides a framework for measuring fair value in GAAP, which includes considerations for valuing assets and liabilities that are acquired or assumed in a business combination.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and should consider the perspectives of buyers and sellers in the market. This market-based approach is crucial for providing accurate and transparent financial information to stakeholders.
The process of measuring fair value can be complex and often requires significant judgment, especially for items that are not actively traded in the markets. Inputs for valuation techniques may include observable data such as market prices or quotes, or unobservable data which require more estimation and management judgment. Regardless of the method, the objective remains consistent: to determine the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date.