# ASC 405-20-05: Liabilities — Extinguishments of Liabilities — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/405/20/#05-overview-and-background)

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## ASC 405-20-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/405/20/#05-overview-and-background)

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##### [405-20-05-1](https://asc.understandingaccounting.org/asc/405/20/#405-20-05-1)

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This Subtopic addresses extinguishments of liabilities. This Subtopic does not address debt conversions or troubled debt restructurings. The accounting guidance for those areas is addressed in Subtopics 470-20 and 470-60.

##### [405-20-05-2](https://asc.understandingaccounting.org/asc/405/20/#405-20-05-2)

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An entity may settle a liability by transferring assets to the creditor or otherwise obtaining an unconditional release. Alternatively, an entity may enter into other arrangements designed to set aside assets dedicated to eventually settling a liability. Accounting for those arrangements has raised issues about when a liability should be considered extinguished. This Subtopic establishes standards for resolving those issues.