Accounting CBE Practice Exam

Observable inputs are values derived from market data and information that can be observed in the market, used in fair value measurement under IFRS 13. This includes quoted prices in active markets for identical or similar assets, as well as other market-derived data such as broker quotes or data service feeds. That is why the statement that observable inputs reflect market data and observable information is correct—they come from sources outside the entity and reflect current market participants’ assumptions. In contrast, inputs that are unobservable come from internal estimates when there is no active market, and relying on the last transaction price alone doesn’t always captures current market conditions or be applicable in all scenarios.