If a government issues new debt, and places the proceeds in an escrow account pending the maturity date of existing debt, the existing debt is said to be defeased.

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An advanced refunding exists when the proceeds are placed in an escrow account pending the call date or maturity date of the existing debt. The debt is said to be defeased which means that the old debt is not reported in the financial statements and is replaced by the new debt.

If a Government Issues New Debt, and Places the Proceeds