The Conditions That Were Required by the Former AASB 1014

question 25

Multiple Choice

The conditions that were required by the former AASB 1014 to be satisfied in order to achieve an insubstance debt defeasance using a trust include:

• A) Irrevocably transfer risk-free assets to a trust, the trustees of which are independent, and remain independent, of the entity, and which is solely used for administering those assets so as to meet the servicing requirements (both interest and principal) of the debt.
• B) The assets transferred to the trust must be of an amount and type suited to the amount and timing of both the principal and interest servicing requirements.
• C) Irrevocably transfer risk-free assets to a trust, the trustees of which are controlled by the entity, and which is mainly used for administering those assets so as to meet the servicing requirements (both interest and principal) of the debt.
• D) Irrevocably transfer risk-free assets to a trust, the trustees of which are independent, and remain independent, of the entity, and which is solely used for administering those assets so as to meet the servicing requirements (both interest and principal) of the debt and the assets transferred to the trust must be of an amount and type suited to the amount and timing of both the principal and interest servicing requirements.
• E) The assets transferred to the trust must be of an amount and type suited to the amount and timing of both the principal and interest servicing requirements and irrevocably transfer risk-free assets to a trust, the trustees of which are controlled by the entity, and which is mainly used for administering those assets so as to meet the servicing requirements (both interest and principal) of the debt.

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Definitions:

Michael Hammer

An American engineer, management author, and business consultant known for his work on reengineering business processes.

Break Even

The point at which total cost and total revenue are equal, resulting in no net loss or gain.

Process Reengineering

The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance.

Michael Hammer

A pioneer of business process reengineering, known for his work on improving business processes to enhance competitiveness.