Definition: Debt cancellation

National accounts

Debt cancellation is a bilateral agreement between a creditor and a debtor to cancel or to forgive part or all of a liability outstanding, the debt, incurred by the debtor to the creditor.  The debt, which is cancelled, was originally on the liability side of the debtor and on the asset side of the creditor: it no longer exists after the cancellation.
Source:
Eurostat, "ESA 95 manual on government deficit and debt, 2002 Edition", Office for Official Publications of the European Communities, Luxembourg, 2002, Chapter II.4
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