{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/470/30/#55-implementation-guidance-and-illustrations","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","topic":"470","topic_title":"Debt","subtopic":"470-30","subtopic_title":"Participating Mortgage Loans","section":{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"470-30-55-1","para":"55-1","html":"<div class=\"asc-body\"><div class=\"norm-text\">This Example illustrates the guidance in this Subtopic.</div> </div>","snippet":"This Example illustrates the guidance in this Subtopic.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6333593e876d6a621d863098878f72989f59e3cf5a8d5cc51ec7574687f81193","downloaded_from":"2026-09-10T00:32:22.883Z","last_downloaded_at":"2026-09-10T00:32:22.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481177","source_sha256":"92eb1a5856a10d51fd6bbb4441a489d3804161cec6213b18d1905ae43f9a48b2"}},{"citation":"470-30-55-2","para":"55-2","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_62523B1B-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Assume that on January 1, 19X1, Borrower Co. purchased a property for $10 million. On that date, Borrower paid $1 million cash and entered into a participating mortgage loan agreement with Lender Co. in the amount of $9 million. </span></span> </div> </div>","snippet":"Assume that on January 1, 19X1, Borrower Co. purchased a property for $10 million. On that date, Borrower paid $1 million cash and entered into a participating mortgage loan agreement with Lender Co. in the amount of $9 …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cc046e36092c7bb6c65ad7fde4bda6aa29564bd296f342ee9c3078268e81cc17","downloaded_from":"2026-09-10T00:32:22.883Z","last_downloaded_at":"2026-09-10T00:32:22.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481177","source_sha256":"92eb1a5856a10d51fd6bbb4441a489d3804161cec6213b18d1905ae43f9a48b2"}},{"citation":"470-30-55-3","para":"55-3","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_62523CBF-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The loan agreement has the following terms: </span></span> <ol class=\"ol-norm\"> <li class=\"li-norm\"><span class=\"linum\">a</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_62523E12-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">15 year term </span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">b</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_62523F52-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Interest-only periodic payments, principal to be repaid at end of term </span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">c</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_62524093-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">5% stated interest rate </span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">d</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_625241E6-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">20% participation in appreciation in the value of the property above $10 million, payable at maturity (or earlier if the asset is sold or the loan is refinanced). </span></span> </div> </li> </ol> </div> </div>","snippet":"The loan agreement has the following terms:\n(a) 15 year term\n(b) Interest-only periodic payments, principal to be repaid at end of term\n(c) 5% stated interest rate\n(d) 20% participation in appreciation in the value of th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d9a6f9505ec13a95e41557f7bb532621bffe66052c7e1fc6722f6d821c3c626d","downloaded_from":"2026-09-10T00:32:22.883Z","last_downloaded_at":"2026-09-10T00:32:22.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481177","source_sha256":"92eb1a5856a10d51fd6bbb4441a489d3804161cec6213b18d1905ae43f9a48b2"}},{"citation":"470-30-55-4","para":"55-4","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_62524321-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Assumptions related to the <a href=\"/glossary/f/#fair-value\" class=\"term\" title=\"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.\"><span>fair value</span></a> of the participation feature are as follows. </span></span> <ul class=\"ul simple\" id=\"d3e10050-112622__GUID-7F064595-E583-41B8-B8E7-DACA6489F1FD\"> <li class=\"li\" id=\"d3e10050-112622__SL6401605-112622\"> <div class=\"p\"> <div class=\"fig figure fignone\" id=\"d3e10050-112622__tbl-d3e10090\"> <img src=\"/asc-img/GUID-8FCBAA19-0630-4D2D-BEDB-B1366D73BFA1-low.gif\" altsource=\"GUID-8FCBAA19-0630-4D2D-BEDB-B1366D73BFA1-low.gif\" alt=\" \" loading=\"lazy\"> <span class=\"sfragment\" id=\"sfr_625248CC-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\"></span></span> <div class=\"figcaption\">Date Fair Value Estimated Payment Years in Future 1/1/X1 \" $25,055 \" \" $300,000 \" 15 12/31/X1 \" 40,063 \" \" 320,000 \" 14 12/31/X2 \" 54,122 \" \" 333,000 \" 13\t</div></div> </div> </li> </ul> </div> </div>","snippet":"Assumptions related to the fair value of the participation feature are as follows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a0f2595a048569f392e6d3b3a2fdf2e689f4d25b26554414d9622fcac5cd51bb","downloaded_from":"2026-09-10T00:32:22.883Z","last_downloaded_at":"2026-09-10T00:32:22.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481177","source_sha256":"92eb1a5856a10d51fd6bbb4441a489d3804161cec6213b18d1905ae43f9a48b2"}},{"citation":"470-30-55-5","para":"55-5","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_62524A0E-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Based on the preceding assumptions, Borrower Co. should make the following journal entries for this participating mortgage loan. </span></span> <ul class=\"ul simple\" id=\"d3e10050-112622__GUID-071FC466-3E60-407C-92A0-0D10BD53AF22\"> <li class=\"li\" id=\"d3e10050-112622__SL6401606-112622\"> <div class=\"p\"> <div class=\"fig figure fignone\" id=\"d3e10050-112622__tbl-d3e10107\"> <img src=\"/asc-img/GUID-219B13AD-8F51-46A5-9EB7-EB14409AAA9A-low.gif\" altsource=\"GUID-219B13AD-8F51-46A5-9EB7-EB14409AAA9A-low.gif\" alt=\" \" loading=\"lazy\"> <span class=\"sfragment\" id=\"sfr_62524ED6-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\"></span></span> <div class=\"figcaption\">\"a. On January 1, 19X1, the following journal entries should be recorded:\" Cash \" $9,000,000 \" Loan discount \" 25,055 \" Mortgage loan payable \" $9,000,000 \" Participation liability \" 25,055 \" To record participating debt and estimate of participation liability (based on fair value of participation feature). Property \" $10,000,000 \" Cash \" 10,000,000 \" To record purchase of property. \"b. By the end of 19X1, entries to record interest expense and amortization of discount throughout the year would have taken the following form:\" Interest expense \" $451,159 \" Interest payable \" 450,000 \" Loan discount \" 1,159 \" To record interest expense and amortization of debt discount using the interest method and an effective rate of 5.03 percent (rounded). Loan discount \" $15,008 \" Participation liability \" 15,008 \" To adjust balance of participation liability to fair value at end of period. The adjustment is calculated as follows: Fair value at 12/31/X1 \" $40,063 \" Fair value at 1/1/X1 \" 25,055 \" Adjustment \" $15,008 \" \"Note: For purposes of this illustration, the fair value of the participation feature at 12/31/X1 is based on a revised estimate of the equity participation that would be payable in fourteen years of $320,000.\" \"c. At the end of 19X2, entries to record interest expense and amortization of discount throughout the year would have taken the following form:\" Interest expense \" $451,979 \" Interest payable \" 450,000 \" Loan discount \" 1,979 \" \"To record interest expense and amortization of debt discount, using the interest method and an effective rate of 5.04 percent (rounded).\" Loan discount \" $14,059 \" Participation liability \" 14,059 \" \"To adjust recorded participation liability of $40,063 to fair value at 12/31/X2 of $54,122.\" </div></div> </div> </li> </ul> </div> </div>","snippet":"Based on the preceding assumptions, Borrower Co. should make the following journal entries for this participating mortgage loan.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:189e317b3d5d058bae84fdef915bef28a51c2233e9f51ed7bc3f60f3926d2514","downloaded_from":"2026-09-10T00:32:22.883Z","last_downloaded_at":"2026-09-10T00:32:22.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481177","source_sha256":"92eb1a5856a10d51fd6bbb4441a489d3804161cec6213b18d1905ae43f9a48b2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0f004e88878d4b12c14d81d3bb6b4318ae53b37844409782f43f6d6ce96c8f1b","downloaded_from":"2026-09-10T00:32:22.883Z","last_downloaded_at":"2026-09-10T00:32:22.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481177","source_sha256":"92eb1a5856a10d51fd6bbb4441a489d3804161cec6213b18d1905ae43f9a48b2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d8e7b5eeff85ad524271a70560f4d1c95e9e2e17af231f34e9bd9bd6dfb57447","downloaded_from":"2026-09-10T00:32:22.883Z","last_downloaded_at":"2026-09-10T00:32:22.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481177","source_sha256":"92eb1a5856a10d51fd6bbb4441a489d3804161cec6213b18d1905ae43f9a48b2"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d8e7b5eeff85ad524271a70560f4d1c95e9e2e17af231f34e9bd9bd6dfb57447","downloaded_from":"2026-09-10T00:32:22.883Z","last_downloaded_at":"2026-09-10T00:32:22.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481177","source_sha256":"92eb1a5856a10d51fd6bbb4441a489d3804161cec6213b18d1905ae43f9a48b2"}}