# ASC 835-30-25: Interest — Imputation of Interest — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/835/30/#25-recognition) 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): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:e19cf93a2d8b6353f5d4552f96950bcf1da9a82863a15225a8468bae38499f3b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 835-30-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/835/30/#25-recognition) SEC content: no ##### [835-30-25-1](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:33985eb50a8da6264eb0bae18eab933ed3c9e4487778a0ead8c19915da5fd75b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section provides guidance on the imputation of interest. #### Imputation of Interest ##### [835-30-25-2](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:aace124c4978a7df668fd5d0ca8a6ff06cac549691fbdc5aaa0bec9c2ef8c8a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If determinable, the established exchange price (which, presumably, is the same as the price for a cash sale) of property, goods, or service acquired or sold in consideration for a note may be used to establish the present value of the note. When notes are traded in an open market, the market rate of interest and quoted prices of the notes provide the evidence of the present value. These methods are preferable means of establishing the present value of the note. ##### [835-30-25-3](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:68f72dc6ca581ea8eed67054df72ea26f915f970d7ec2038b23b3b5b356d1251 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an established exchange price is not determinable and if the note has no ready market, the problem of determining present value is more difficult. To estimate the present value of a note under such circumstances, an applicable interest rate is approximated that may differ from the stated or coupon rate. This process of approximation is called imputation, and the resulting rate is called an [imputed interest rate](https://asc.understandingaccounting.org/glossary/i/#imputed-interest-rate "The interest rate that results from a process of approximation (or imputation) required when the present value of a note must be estimated because an established exchange price is not determinable and the note has no ready market."). Nonrecognition of an apparently small difference between the stated rate of interest and the applicable current rate may have a material effect on the financial statements if the face amount of the note is large and its term is relatively long. ##### [835-30-25-4](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:7d98728f3969cf3f839f0fe1ac0d9cdf26e7febe04c46567afc39f1b9ad6ee4e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a note is received or issued solely for cash and no other right or privilege is exchanged, it is presumed to have a present value at issuance measured by the cash proceeds exchanged. If cash and some other rights or privileges are exchanged for a note, the value of the rights or privileges shall be given accounting recognition as described in paragraph [835-30-25-6](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-6). ##### [835-30-25-5](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:380148685350de21f54405f26abf319e36952d4dc29fc98f15ad2b8ef2be55a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The total amount of interest during the entire period of a cash loan is generally measured by the difference between the actual amount of cash received by the borrower and the total amount agreed to be repaid to the lender. The difference between the face amount and the proceeds upon issuance is shown as either [discount](https://asc.understandingaccounting.org/glossary/d/#discount "The difference between the net proceeds, after expense, received upon issuance of debt and the amount repayable at its maturity. See Premium.") or [premium](https://asc.understandingaccounting.org/glossary/p/#premium "The excess of the net proceeds, after expense, received upon issuance of debt over the amount repayable at its maturity. See Discount."). For example, if a bond is issued at a discount or premium, such discount or premium is recognized in accounting for the original issue. The coupon or stated interest rate is not regarded as the effective yield or market rate. Moreover, if a long-term non-interest-bearing note or bond is issued, its net proceeds are less than face amount and an effective interest rate is based on its [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.") upon issuance. ##### [835-30-25-6](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:5ec6ff8f5934714215ba29b1983b82033444af95ae6c0e3a44544a77481e370c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A note issued solely for cash equal to its face amount is presumed to earn the stated rate of interest. However, in some cases the parties may also exchange unstated (or stated) rights or privileges, which are given accounting recognition by establishing a note discount or premium account. In such instances, the effective interest rate differs from the stated rate. For example, an entity may lend a supplier cash that is to be repaid five years hence with no stated interest. Such a non-interest-bearing loan may be partial consideration under a purchase contract for supplier products at lower than the prevailing market prices. In this circumstance, the difference between the present value of the receivable and the cash loaned to the supplier is appropriately regarded as an addition to the cost of products purchased during the contract term. The note discount shall be amortized as interest income over the five-year life of the note, as required by Section 835-30-35. ##### [835-30-25-7](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:4acabcef425e7156bee93032dd3c592d227057e75cf7faa0c99434067f704444 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A note exchanged for property, goods, or service represents the following two elements, which may or may not be stipulated in the note: 1. a The principal amount, equivalent to the bargained exchange price of the property, goods, or service as established between the supplier and the purchaser 2. b An interest factor to compensate the supplier over the life of the note for the use of funds that would have been received in a cash transaction at the time of the exchange. ##### [835-30-25-8](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:85dafaeb0cc3d4d563e29c94e628dc4104a9adcb606a04b1f32ac21b4862ee12 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Notes exchanged for property, goods, or services are valued and accounted for at the present value of the consideration exchanged between the contracting parties at the date of the transaction in a manner similar to that followed for a cash transaction. ##### [835-30-25-9](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:3f6dbf240204de3db2cd689ee40abaf9554ff78a4ecb6a405512cf3a641b359d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The difference between the face amount and the present value upon issuance is shown as either discount or premium. ##### [835-30-25-10](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:70668a58461db5711844ce6547d06235bfe75803c79a35a0e144d9ef42c4acca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In circumstances where interest is not stated, the stated amount is unreasonable, or the stated face amount of the note is materially different from the current cash sales price for the same or similar items or from the fair value of the note at the date of the transaction, the note, the sales price, and the cost of the property, goods, or service exchanged for the note shall be recorded at the fair value of the property, goods, or service or at an amount that reasonably approximates the fair value of the note, whichever is the more clearly determinable. That amount may or may not be the same as its face amount, and any resulting discount or premium shall be accounted for as an element of interest over the life of the note. ##### [835-30-25-11](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:cf2e9247dbd36964336e967c0b3c716abf122fff1a107ad43cf946cc03f26b60 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the absence of established exchange prices for the related property, goods, or service or evidence of the fair value of the note (as described in paragraph [835-30-25-2](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-2)), the present value of a note that stipulates either no interest or a rate of interest that is clearly unreasonable shall be determined by discounting all future payments on the notes using an imputed rate of interest. This determination shall be made at the time the note is issued, assumed, or acquired; any subsequent changes in prevailing interest rates shall be ignored. #### Determining an Appropriate Interest Rate ##### [835-30-25-12](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:ade33242548390d2b03f9847f64cd5b9ced43293750f5319938299eccf3df04a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [835-30-10-1](https://asc.understandingaccounting.org/asc/835/30/#835-30-10-1) identifies the objective of the guidance in this Subtopic for approximating an interest rate. The variety of transactions encountered precludes any specific interest rate from being applicable in all circumstances. However, this paragraph provides the following general guidelines: 1. a The choice of a rate may be affected by the credit standing of the issuer, restrictive covenants, the collateral, payment and other terms pertaining to the debt, and, if appropriate, the tax consequences to the buyer and seller. 2. b The prevailing rates for similar instruments of issuers with similar credit ratings will normally help determine the appropriate interest rate for determining the present value of a specific note at its date of issuance. 3. c In any event, the rate used for valuation purposes shall be the rate at which the debtor can obtain financing of a similar nature from other sources at the date of the transaction. ##### [835-30-25-13](https://asc.understandingaccounting.org/asc/835/30/#835-30-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:49:48.308Z to 2026-09-10T01:49:48.308Z Record version: sha256:3a52126c180d1fd170845292d80887d0e7859a868bd12702e37d8398e27a9abc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The selection of a rate may be affected by many considerations. For instance, where applicable, the choice of a rate may be influenced by the following: 1. a An approximation of the prevailing market rates for the source of credit that would provide a market for sale or assignment of the note 2. b The prime or higher rate for notes that are discounted with banks, giving due weight to the credit standing of the maker 3. c Published market rates for similar-quality bonds 4. d Current rates for debentures with substantially identical terms and risks that are traded in open markets 5. e The current rate charged by investors for first or second mortgage loans on similar property.