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A technique of liability immunization which permits a debtor to offset and eliminate a liability with the purchase of government securities or a special risk management contract. For tax, regulatory, contractual or other reasons, the issuer of debt may find it more appropriate to set aside certain assets-typically government bonds, and/or cash equivalents-against a debt obligation rather than repurchasing and canceling the debt. Unless the dedication of the assets set aside for extinguishing the debt is irrevocable, both the assets and liabilities will continue to appear on the balance sheet.
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