Q:   Is an asset alone a financial instrument?

No, an asset alone is not a financial instrument.  Wholly owned assets like operational equipment (e.g. forklifts, shredders, RF test equipment, balers, etc.), company vehicles, or real property may be used as collateral to establish a financial instrument such as a surety bond, letter of credit, or an assignment to name a few.

Core Requirement 9(e)(4) says, “Establish a financial instrument to provide the necessary funds for closure, including in the event of abandonment…”  In the event of abandonment, creditors may seize assets.  Assets that aren’t tied to a financial instrument might not be able to be used to provide the necessary funds for closure in that case. The way that the assets are tied to a financial instrument to be legally bound and effective against other creditors may vary from jurisdiction to jurisdiction, and that is why the financial instrument should be consistent with applicable law.

For example, a bank or insurer may create a surety bond using a company’s 2019 Hino 268 with a VIN of XXX and assign the deed/ownership to the surety bond for the purpose of funding closure of the facility at 1313 Mockingbird Lane, Refurbishing Heights, TX, USA through the sale of the truck.