A private business owner has taken out a loan from a bank, and he has created a sepa-

rate trust fund with cash equivalents (short-term U.S. treasury bonds and short-term certificates

of deposit) sufficient to pay the debt. The business owner is researching whether he must con-

tinue to record the loan payable on his financial statements.

The Codification refers to the setting aside of assets, as planned payment of a debt, as an "in-

substance defeasance."

Does the business owner's so-called "in-substance defeasance" allow him to derec-

ognize the liability? Explain