Which one of the following scenarios would most likely result in a financial asset being derecognized because of the expiration of its cash flows?
A. Default of interest and principal payments of a corporate bond
B. An outstanding option contract that is currently exercisable but has yet to be exercised as of the reporting date
C. An outstanding trade receivable due from an entity that just filed for bankruptcy
D. The prepayment of a loan’s outstanding interest and principal prior to its maturity date
D. The prepayment of a loan’s outstanding interest and principal prior to its maturity date. When a loan is prepaid, the obligation to receive the contracted cash flows has been satisfied, resulting in the termination of the financial asset, according to the requirements of the relevant accounting standards.
