# ASC 470-30-55: Debt — Participating Mortgage Loans — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/470/30/#55-implementation-guidance-and-illustrations) 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): 2026-09-10T00:32:22.883Z to 2026-09-10T00:32:22.883Z Record version: sha256:d8e7b5eeff85ad524271a70560f4d1c95e9e2e17af231f34e9bd9bd6dfb57447 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-30-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/470/30/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [470-30-55-1](https://asc.understandingaccounting.org/asc/470/30/#470-30-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:22.883Z to 2026-09-10T00:32:22.883Z Record version: sha256:6333593e876d6a621d863098878f72989f59e3cf5a8d5cc51ec7574687f81193 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in this Subtopic. ##### [470-30-55-2](https://asc.understandingaccounting.org/asc/470/30/#470-30-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:22.883Z to 2026-09-10T00:32:22.883Z Record version: sha256:cc046e36092c7bb6c65ad7fde4bda6aa29564bd296f342ee9c3078268e81cc17 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [470-30-55-3](https://asc.understandingaccounting.org/asc/470/30/#470-30-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:22.883Z to 2026-09-10T00:32:22.883Z Record version: sha256:d9a6f9505ec13a95e41557f7bb532621bffe66052c7e1fc6722f6d821c3c626d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The loan agreement has the following terms: 1. a 15 year term 2. b Interest-only periodic payments, principal to be repaid at end of term 3. c 5% stated interest rate 4. d 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). ##### [470-30-55-4](https://asc.understandingaccounting.org/asc/470/30/#470-30-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:22.883Z to 2026-09-10T00:32:22.883Z Record version: sha256:a0f2595a048569f392e6d3b3a2fdf2e689f4d25b26554414d9622fcac5cd51bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assumptions related to 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 participation feature are as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-8FCBAA19-0630-4D2D-BEDB-B1366D73BFA1-low.gif) 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 ##### [470-30-55-5](https://asc.understandingaccounting.org/asc/470/30/#470-30-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:32:22.883Z to 2026-09-10T00:32:22.883Z Record version: sha256:189e317b3d5d058bae84fdef915bef28a51c2233e9f51ed7bc3f60f3926d2514 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on the preceding assumptions, Borrower Co. should make the following journal entries for this participating mortgage loan. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-219B13AD-8F51-46A5-9EB7-EB14409AAA9A-low.gif) "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."