Insubstance debt defeasance is no longer allowed under AASB 132:
A) Because this form of defeasance is no longer used in Australia.
B) Because the new standard takes a form over substance approach.
C) Because it is inappropriate to extinguish a debt where the discharge of the obligation has been accepted by the creditor.
D) Because this type of action requires the offsetting of financial assets and liabilities in circumstances not allowed under AASB 1014.
E) None of the given answers.

Question

Quizplus · Accepted Answer

AASB 132 takes a form over substance approach and requires entities to account for transactions based on their economic substance rather than legal form. Insubstance debt defeasance involves transferring assets to a trustee to pay off a debt, which masks the underlying economic reality of the transaction. Therefore, it is no longer allowed under AASB 132.

Insubstance Debt Defeasance Is No Longer Allowed Under AASB 132