The former AASB 1014 required that if a trust was established to assume the responsibility for a debt in an insubstance debt defeasance,that trust must:
A) Be under the control of the debtor entity and have enough securities issued by a credit-worthy government to ensure that there is a very low probability that the debtor entity will have any further obligation in relation to the debt.
B) Be a company set up under the relevant state and federal statutes to administer the risk-free assets that are to be used to release the debtor entity from the primary obligation for the debt.
C) Have risk-free assets irrevocably transferred to it, which are of a type suited to the amount and timing so as to meet the servicing requirements of the debt..
D) Be a government-guaranteed financial institution that is required to report annually to the Australian Securities and Investments Commission.
E) None of the given answers.

Question

Quizplus · Accepted Answer

Former AASB 1014 required that a trust established for insubstance debt defeasance to have risk-free assets irrevocably transferred to it which are of a type suited to the amount and timing, so as to meet the servicing requirements of the debt. Option A, B, and D are incorrect as they do not match the requirements set by the standard. Option E is incorrect as it is not an appropriate answer.

The Former AASB 1014 Required That If a Trust Was