A Debt Cannot Be Considered Extinguished,and Therefore Removed from the Balance

question 31

Multiple Choice

A debt cannot be considered extinguished,and therefore removed from the balance sheet,unless:

• A) It is not likely that the reporting entity will be required to assume the debt-servicing requirements of the loan and it has not otherwise guaranteed the servicing of the debt.
• B) The probability that the reporting entity will be required to repay the principal and interest remaining under the conditions of the debt is so low as to be considered virtually impossible.
• C) It is highly improbable that the reporting entity will be required to assume again the primary obligation for the debt-servicing requirements or to satisfy any guarantee, indemnity or similar relating to such requirements.
• D) The possibility of the reporting entity being required to assume responsibility for the debt is considered remote.
• E) None of the given answers.

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Definitions:

Depository Institutions Deregulation

The process of removing government restrictions on banks and other depository institutions to allow for more competition and greater efficiency in the financial sector.

Reserve Requirements

Reserve requirements are regulations set by central banks determining the minimum amount of reserves that banks must hold against deposits.

Vault Cash

Physical money that is held in banks' vaults, often used to meet day-to-day withdrawal demands and regulatory reserve requirements.

Banking Act

Legislation that regulates the operation of banks, establishes banking practices, and ensures the stability and integrity of the banking system.