{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/835/30/#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":"835","topic_title":"Interest","subtopic":"835-30","subtopic_title":"Imputation of Interest","section":{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Implementation Guidance","paragraphs":[{"citation":"835-30-55-1","para":"55-1","html":"
The guidance in the following paragraphs is not subject to the scope limitation in paragraph 835-30-15-3(b).
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Generally accepted accounting principles (GAAP) require use of the interest method. There is no basis for using an alternative to the interest method except if the results of alternative methods do not differ materially from those obtained by using the interest method. Therefore, methods other than the interest method, such as the rule of 78s, sum of the years' digits, and straight-line methods shall not be used if their results materially differ from the interest method.
","snippet":"Generally accepted accounting principles (GAAP) require use of the interest method. There is no basis for using an alternative to the interest method except if the results of alternative methods do not differ materially …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba8bce015f46ff567a556826ffc7d972c7f5bc4c10146854ca5fcf67be6f48a2","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}},{"citation":"835-30-55-3","para":"55-3","html":"
The interest method produces periodic interest income at a constant effective yield on a loan; therefore, in a lending arrangement in which interest collected in earlier periods will be greater than that computed using the interest method, the excess interest collected shall be deferred and recognized as interest income in later periods so as to produce a constant yield. For example, the interest method would be applied in this way to loans for which interest is collected by the sum of the years' digits method.
","snippet":"The interest method produces periodic interest income at a constant effective yield on a loan; therefore, in a lending arrangement in which interest collected in earlier periods will be greater than that computed using t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:34772db067ab8a33f235a43c6ae01ac7ac7fe3b5e47a45f884e9eb33e9f44d4d","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c30f75fd9d2c40aaf2918b7556bf6ca8e9e2806465a1f4164ffdfa358c8c32c4","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}},{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"835-30-55-4","para":"55-4","html":"
This Example illustrates the guidance in paragraphs 835-30-05-2,
835-30-25-3 through 25-4
, and
835-30-25-10 through 25-11
that the coupon or stated rate of interest and the face amount of a note or bond may not be the appropriate bases for valuation. The presumption that market values provide the evidence for valuation must be overcome before using coupon or stated rates and face or maturity amounts as the bases for accounting.
","snippet":"This Example illustrates the guidance in paragraphs 835-30-05-2, 835-30-25-3 through 25-4, and 835-30-25-10 through 25-11 that the coupon or stated rate of interest and the face amount of a note or bond may not be the ap…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a0f95e4ed7c2c3d456418a313eba998fd71b200206ae19497fa139e9b8171c1b","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}},{"citation":"835-30-55-5","para":"55-5","html":"
Upon issuance of a note or bond, the issuer customarily records as a liability the face or principal amount of the obligation. Ordinarily, the recorded liability also represents the amount that is to be repaid upon maturity of the obligation. The value recorded in the liability account, however, may be different from the proceeds received or the present value of the obligation at issuance if the market rate of interest differs from the coupon rate of interest. For example, consider the issuance of a $1,000, 20-year bond that bears interest at 10% annually. If we assume that 10% is an appropriate market rate of interest for such a bond, the proceeds at issuance will be $1,000. The bond payable would be recorded at $1,000, which represents the amount repayable at maturity and also the present value at issuance, which is equal to the proceeds. However, under similar circumstances, if the prevailing market rate were more (less) than 10%, a 20-year 10% bond with a face amount of $1,000 would usually have a value at issuance and provide cash proceeds of less (more) than $1,000. The significant point is that, upon issuance, a bond is valued at the present value of the future coupon interest payments plus the present value of the future principal payments (face amount). These two sets of future cash payments are discounted at the prevailing market rate of interest (for an equivalent security) at the date of issuance of the debt. As the 8% and 12% columns show, premium or discount arises when the prevailing market rate of interest differs from the coupon rate.
","snippet":"Upon issuance of a note or bond, the issuer customarily records as a liability the face or principal amount of the obligation. Ordinarily, the recorded liability also represents the amount that is to be repaid upon matur…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:48d24853320edb35d64a7f9b9ce06ba041c898215ccdf43d1a39a669029b94ae","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}},{"citation":"835-30-55-6","para":"55-6","html":"
In the case of a $1,000 non-interest-bearing 20-year note, where the prevailing market rate for comparable credit risks is 10%, the following valuation should be made.
","snippet":"In the case of a $1,000 non-interest-bearing 20-year note, where the prevailing market rate for comparable credit risks is 10%, the following valuation should be made.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:16c388f568dbf4f8ec3b11e728c05227d367d7a7178e59b9334d6f8170b97c88","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}},{"citation":"835-30-55-7","para":"55-7","html":"
Comparison of the two tables shows the significant impact of interest.
","snippet":"Comparison of the two tables shows the significant impact of interest.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c5a051a1391d9847ca98e1b82e79fbb8a02abcb0cdbd4d3b35b4cc36c808b0a","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}},{"citation":"835-30-55-8","para":"55-8","html":"
This Example is an illustration of the guidance in paragraphs
835-30-45-1 through 45-3
related to the balance sheet presentation of notes that are discounted.
","snippet":"This Example is an illustration of the guidance in paragraphs 835-30-45-1 through 45-3 related to the balance sheet presentation of notes that are discounted.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66467164ac39f1e2982a763252fdf7a268a7ecfb7efd1cdb22af95112e5f71f6","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9fe390a7cf51a124309e4bb5968cc59ee65d944d49375375a064c1e9c633d561","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:72cb202ad064a54cefb9a8384fc833ffb328c82ac9051c6d501e800e197d4eef","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:72cb202ad064a54cefb9a8384fc833ffb328c82ac9051c6d501e800e197d4eef","downloaded_from":"2026-09-10T01:49:57.466Z","last_downloaded_at":"2026-09-10T01:49:57.466Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482949","source_sha256":"5f00d5730922563df49fa5ae0416a193df1de2a80be7f6fe0af3cedb8c38734e"}}