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- Title
A Survey on the Effects of Defeasing Debt.
- Authors
Mielke, David E.; Seifert, James
- Abstract
Defeasance of debt is a relatively new tool for the management of the corporate balance sheet. The accounting rules for reporting these transactions have generated a great deal of controversy. Critics claim that the ability to record an extraordinary gain from the defeasance of debt permits the reporting of paper profits. Additionally, some were concerned about the disclosure requirements and with potential for the promotion of wholesale major changes in corporate capital structure. A survey was conducted to gain insight as to why companies might defease debt, to examine the impact of defeasance on the firm's financial characteristics, and to investigate the type of disclosure provided in the annual reports. Analysis of the results indicates that the critics have little practical concern. The paper profits and balance sheet changes in this sample were relatively minimal. The major problem found was with the relatively little information that corporations provided regarding these transactions.
- Subjects
DEFEASANCE; FINANCIAL statements; CORPORATE debt; DEBT retirement; CORPORATE finance
- Publication
Journal of Accounting, Auditing & Finance, 1987, Vol 2, Issue 1, p65
- ISSN
0148-558X
- Publication type
Article
- DOI
10.1177/0148558X8700200105