Insubstance Debt Defeasance Was Defined in the Former AASB 1014

question 28

Multiple Choice

Insubstance debt defeasance was defined in the former AASB 1014 as:

• A) A type of legal defeasance in which a designated third entity assumes responsibility for the debt or a suitable legal arrangement is created to ensure that the debt is serviced and this is guaranteed by the debtor entity.
• B) A defeasance, other than a legal defeasance, in which the debtor effectively achieves release from the primary obligation for a debt by placing in trust assets that are adequate to meet the servicing requirements (both interest and principal) of the debt or by having a suitable entity assume responsibility for those servicing requirements.
• C) A defeasance, including a legal defeasance, in which the debtor effectively achieves release from the requirement to meet the interest and principal repayments on a debt by arranging for a suitable entity to assume the debt.
• D) A defeasance where the substance of the arrangement is equivalent to a legal defeasance in that the primary obligation for the debt is assumed by a designated third party with the knowledge and permission of the lender.
• E) None of the given answers.

Comprehend the accounting methods for equity and debt securities.

Recognize when to use the consolidation method for financial reporting.

Grasp the concept and components of comprehensive income.

Identify characteristics and accounting treatments for various types of investments, including held-to-maturity, trading, and available-for-sale securities.

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Definitions:

Insurance Contract

A legally binding agreement between an insurer and the insured, outlining the terms for the insurance coverage.

Premium

The amount paid for an insurance policy or towards a service that provides additional features or benefits, often on a regular basis like annually or monthly.

Insurer

An entity that provides insurance policies to individuals or organizations, offering protection against financial loss from specified risks.

Insurance Coverage

Protection provided by an insurance policy against financial losses from specific risks or events.