Final answer:
The correct statement regarding fair value measurement is that it is a market-based measurement. Fair value reflects prices in actual market transactions for similar assets or liabilities and does take risk into account, contrary to the listed incorrect options.
Step-by-step explanation:
Fair Value Measurement
Fair value is a market-based measurement, not an entity-specific valuation. When assessing fair value for assets and liabilities, it reflects the price at which an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date. This concept is anchored in the principle that valuations should reflect current market conditions and assumptions that market participants would use when pricing the asset or liability. This means that fair value does consider market risks, such as credit risk or market volatility, to which a market participant would be exposed. However, fair value measurements typically do not consider restrictions on the sale or use of an asset that are specific to the current owner; instead, it assumes that the asset can be exchanged in an active market with no such restrictions.
Therefore, the correct statement in the question's list is: Fair value is a market-based measurement. The incorrect statements are that fair value is an entity-specific measurement and that fair value does not consider risk or restrictions. However, it's important to note that fair value does factor in the risks that market participants would consider, and also it often does not consider restrictions that would not apply in a transaction involving market participants.