# ASC 470-30-05: Debt — Participating Mortgage Loans — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/470/30/#05-overview-and-background) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:31:58.075Z to 2026-09-10T00:31:58.075Z Record version: sha256:b8f96a20df8a7b79f4b4144225a5b7a6925e9f34d82564deccf9237b3f2e5404 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-30-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/470/30/#05-overview-and-background) SEC content: no ##### [470-30-05-1](https://asc.understandingaccounting.org/asc/470/30/#470-30-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:58.075Z to 2026-09-10T00:31:58.075Z Record version: sha256:62d24965808b260b4c09738253e5e50c01d9fa919f6d1bd953c0466aaf49d756 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic establishes the borrower's accounting for a participating mortgage loan if the lender is entitled to participate in any of the following: 1. a Appreciation in the [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") of the mortgaged real estate project 2. b The results of operations of the mortgaged real estate project. ##### [470-30-05-2](https://asc.understandingaccounting.org/asc/470/30/#470-30-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:58.075Z to 2026-09-10T00:31:58.075Z Record version: sha256:8ed4210f659f8ad2b872a136e624207eb6557640cf77573ba992333647d720c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The desire for instruments in which the return to the lenders was tied more closely to the performance of the property led to the introduction of participating mortgage loans. ##### [470-30-05-3](https://asc.understandingaccounting.org/asc/470/30/#470-30-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:58.075Z to 2026-09-10T00:31:58.075Z Record version: sha256:59133c3612685e732c5c976050afd84163e85cd8471ecc17ef5935fbd0619e2d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Participating mortgage loans and nonparticipating mortgage loans share all of the following characteristics: 1. a Debtor-creditor relationships between those who provide initial cash outlays and hold the mortgages, and those who are obligated to make subsequent payments to the mortgage holders 2. b Real estate collateral 3. c Periodic fixed-rate or floating-rate interest payments 4. d Fixed maturity dates for stated principal amounts. ##### [470-30-05-4](https://asc.understandingaccounting.org/asc/470/30/#470-30-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:58.075Z to 2026-09-10T00:31:58.075Z Record version: sha256:0e361b63c2913a66395bfca77a0d4fc8182956bd3d026e1b05ee5d5a48db6549 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. However, unlike a nonparticipating mortgage loan arrangement, in a participating mortgage loan, the lender participates in appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project, or in both. ##### [470-30-05-5](https://asc.understandingaccounting.org/asc/470/30/#470-30-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:58.075Z to 2026-09-10T00:31:58.075Z Record version: sha256:20f4d9cfe93040e0679e62675fb8cc421705f17a556d726e873e4a1d39216528 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The terms and economics of participating mortgage loan agreements vary by agreement. The terms and economics of one agreement may create a circumstance in which any participation payment is remote. In another agreement, the terms and economics may transfer many of the risks and rewards of property ownership. ##### [470-30-05-6](https://asc.understandingaccounting.org/asc/470/30/#470-30-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:58.075Z to 2026-09-10T00:31:58.075Z Record version: sha256:bd75fcb3986a9ee3be904364e0a279b9a08abc670b90268bbe2e2512e3d039df Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A lender may be entitled to participate in appreciation in the fair value of a project at any one of the following times: 1. a Upon the sale of the project 2. b At a deemed sale date 3. c At the maturity or refinancing of the loan. ##### [470-30-05-7](https://asc.understandingaccounting.org/asc/470/30/#470-30-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:58.075Z to 2026-09-10T00:31:58.075Z Record version: sha256:e3ffb6e4cf176ef46f621dc02a64fbe9eb067be00a57a11d9f03d347769fb87a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In agreements in which lenders participate in results of operations, the definition of the results of operations may vary among agreements. Examples of these definitions include, but are not limited to, the following: 1. a Revenue 2. b Income 3. c Cash flows before or after debt service. ##### [470-30-05-8](https://asc.understandingaccounting.org/asc/470/30/#470-30-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:58.075Z to 2026-09-10T00:31:58.075Z Record version: sha256:a8fdf1eb2d107857032bab45900a349627810b00040b5f445f7fd1316847fb2d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The participation terms of a participating mortgage loan agreement usually are negotiated concurrently with the other terms of the underlying mortgage loan. A borrower agrees to participation rights generally because of market conditions, or in exchange for concessions granted by the lender on some other term(s) of the loan, such as a lower interest rate or a higher loan-to-value ratio. ##### [470-30-05-9](https://asc.understandingaccounting.org/asc/470/30/#470-30-05-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:58.075Z to 2026-09-10T00:31:58.075Z Record version: sha256:012224be308d74f32acdb45ae545af2d179485932928cf95990fdbb3b1a38515 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The lender's participation reduces the borrower's potential realization of operating results or gain on the sale of the real estate. However, the participation also may reduce any of the following: 1. a The contract interest the borrower is required to pay 2. b The risk that the borrower will be unable to pay interest at the stated or floating rate in the loan agreement and, consequently, the risk that the borrower will default on the loan and need to sell the property 3. c The amount of capital the borrower has at risk, because the loan-to-value ratio normally is higher. Further, the obligation to pay the lender a share of the property appreciation does not increase the current exposure of the borrower to loss in its investment, because the participation payments are made only if the fair value of the property appreciates.