There were two methods of achieving an insubstance debt defeasance in accordance with the former AASB 1014's requirements:
A) Having a risk-free entity assume responsibility for the debt or placing in trust assets adequate to meet the principal and interest servicing requirements of the debt.
B) Obtaining forgiveness of the debt or having a related entity assume the responsibility for the debt.
C) Having a related entity assume the debt or obtaining a legal judgement to extinguish the debt.
D) Placing sufficient assets in a secure offshore entity such that it is virtually certain that the responsibility for the debt will not revert to the reporting entity, or having a suitable entity assume responsibility for the debt.
E) None of the given answers.

Question

Quizplus · Accepted Answer

According to former AASB 1014's requirements, the two methods to achieve insubstance debt defeasance were either to have a risk-free entity assume responsibility for the debt or to place in trust assets adequate to meet the principal and interest servicing requirements of the debt. Option A is the correct choice as it accurately represents one of the two methods.

There Were Two Methods of Achieving an Insubstance Debt Defeasance