legal defeasance

Liabilities1

1. 405-20Extinguishments of Liabilities405 Liabilities

   ASC 405-20 governs when a debtor may derecognize a liability because it has been extinguished. Under 405-20-40-1, extinguishment occurs if and only if the debtor pays the creditor (cash, other financial assets, goods or services, or reacquisition of its own debt securities) and is relieved of the obligation, or the debtor is legally released as primary obligor judicially or by the creditor. The Subtopic also contains special derecognition (breakage) rules for liabilities from prepaid stored-value products and excludes debt conversions and troubled debt restructurings (see 470-20 and 470-60).