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

question 69

Multiple Choice

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

• A) The bonds are legally retired as a result
• B) 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
• C) Neither the assets used to effect the defeasance, nor the bonds themselves, are reported in the balance sheet, even though the bonds remain outstanding
• D) The process may require the company which issued the bonds to make substantial payments in addition to the investments purchased for the defeasance

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Definitions:

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