In-Substance Defeasance Is Sometimes Used as a Method of Bond

question 57

Multiple Choice

In-substance defeasance is sometimes used as a method of bond retirement.Choose the correct statement about this practice.

• A)The firm may invest in any investment-grade debt security to retire the bonds as long as the investment securities are transferred irrevocably to a trustee
• B)The process may require the company which issued the bonds to make substantial payments in addition to the investments purchased for the defeasance
• C)The bonds are legally retired as a result
• D)Neither the assets used to effect the defeasance, nor the bonds themselves, are reported in the balance sheet, even though the bonds remain outstanding