Exam 12: Set-Off and Extinguishment of Debt

Pump It Up Ltd owes Under Ground Oil $170 000 and Under Ground Oil owes Pump It Up Ltd $350 000.Pump It Up Ltd's financial position before these amounts are set-off is: What is the debt/equity ratio for Pump It Up Ltd before and after set-off?

In AASB 132,the ability to set off makes reference to:

When a debt is forgiven the accounting treatment is to:

What is the AASB 132 requirement in relation to debt set-off?

Insubstance debt defeasance refers to an arrangement where assets are placed in trust,meaning that the creditor has now been paid in full:

Businesses may be prepared to incur a loss on the defeasance of debt because:

In relation to applying an amount due from a third party in a "set-off" situation,AASB 132 notes:

If the conditions for set off were initially met,and in a later period cease to be met,the debt remaining is to be:

AASB 132 only allows assets and liabilities to be offset against one another if a legally recognised right to set-off exists for these items:

AASB 132 "Financial Instruments: Presentation" supports a substance over from approach in the accounting treatment for Insubstance Debt Defeasance (ISDD).

The term defeasance means the setting off of one thing against another:

Release from the primary obligation of a debt may theoretically be achieved by:

Cartoons and Co's balance sheet is shown below. Assuming a right to set-off exist with Ink Drawings Ltd,the balance sheet after set-off will be:

Release from the primary obligation for a debt may be achieved by replacement by another debt:

A financial asset is:

A right of set-off may still be applied in the case of Insubstance Debt Defeasance (ISDD)if the entity intends to settle on a net basis,or to realise the asset and settle the liability simultaneously.

Claudia Ltd's statement of financial position is shown below. The above balances include a receivable from Jeremy Ltd for an amount of $100,000 and a payable to Jeremy Ltd for $50,000.A debt contract with ABC Bank signed by Claudia Ltd requires a debt equity ratio of no more than 50%. Assuming a right to set-off exists with Jeremy Ltd,what is the debt to equity ratio of Claudia Ltd?

The effect of setting off on the gearing ratio of the reporting entity is to:

The changes under AASB 132 have removed the need for creditors to be involved in the defeasance process:

The definition of a set-off is that an asset is reduced by the amount of a liability and a net liability remains: