# ASC 860-50-55: Transfers and Servicing — Servicing Assets and Liabilities — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/860/50/#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): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:e3768fd5791d3d6374d16a5e516326ab607266f51fcbfcc51595188db7bd3ee0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 860-50-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/860/50/#55-implementation-guidance-and-illustrations) SEC content: no ##### [860-50-55-1](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:e6884591d86d21b009f9e0d9199b24a4353f4a2e7b460cee0d02ef3827e2e450 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). ##### [860-50-55-2](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:cbd4178892ca8fdeeee73ddbaff284010fe682b528b0418549d5d7cd2f0a7439 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). #### Implementation Guidance ##### [860-50-55-3](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:a11c262d8eae5da3003eecf7a02c3c5cc0e171b9db2e9926a41875242062bf1f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following guidance addresses the accounting for servicing assets and servicing liabilities in certain transactions, specifically: 1. a Recognition of servicing upon sale of a participating interest 2. b Servicer not entitled to receive a contractually specified servicing fee 3. c Servicing assets assumed without cash payment 4. d Subservicing contracts. ##### [860-50-55-4](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:cb12cb55e5f986f0d3c94faa5c360a716702ae4ad7065769ad2c110fe1bf0095 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the entity that transfers a portion of a loan under a participation agreement that meets the definition of a participating interest and qualifies for sale accounting under Subtopic 860-10 obtains the right to receive [benefits of servicing](https://asc.understandingaccounting.org/glossary/b/#benefits-of-servicing "Revenues from contractually specified servicing fees, late charges, and other ancillary sources, including float.") that more than adequately compensate it for servicing the loan, and the entity would continue to service the loan regardless of the [transfer](https://asc.understandingaccounting.org/glossary/t/#transfer "The conveyance of a noncash financial asset by and to someone other than the issuer of that financial asset. A transfer includes the following: Selling a receivable Putting a receivable into a securitization trust Posting a receivable as collateral. A transfer excludes the following: The origination of a receivable Settlement of a receivable The restructuring of a receivable into a security in a troubled debt restructuring.") because it retains part of the participated loan, the entity shall record a servicing asset for the portion of the loan it sold. The assumption that the entity would service the loan because it retains part of the participated loan does not affect the requirement to recognize a servicing asset. Conversely, an entity could not avoid recording a servicing liability if the benefits of servicing are not expected to adequately compensate the servicer for performing the servicing. However, if the benefits of servicing are significantly above an amount that would fairly compensate a substitute service provider, should one be required, the transferred portion does not meet the definition of a participating interest, and, therefore, the transfer does not qualify for sale accounting (see paragraph [860-10-40-6A(b)](https://asc.understandingaccounting.org/asc/860/10/#860-10-40-6A)). ##### [860-50-55-5](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:c37b54ee21b2ef33bc06a9a59b631d4b6ed2088c01bf57a5efdbe1d68939ab31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following guidance addresses whether an entity should recognize a servicing liability if it transfers all or some of a [financial asset](https://asc.understandingaccounting.org/glossary/f/#financial-asset "Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.") that meets the definition of a participating interest that is accounted for as a sale and undertakes an obligation to service the asset but is not entitled to receive a contractually specified servicing fee. In the circumstances described, the transferor-servicer would be required to recognize a servicing liability at fair value if the benefits of servicing are less than [adequate compensation](https://asc.understandingaccounting.org/glossary/a/#adequate-compensation "The amount of benefits of servicing that would fairly compensate a substitute servicer should one be required, which includes the profit that would be demanded in the marketplace. It is the amount demanded by the marketplace to perform the specific type of servicing. Adequate compensation is determined by the marketplace; it does not vary according to the specific servicing costs of the servicer."). The requirements in paragraph [860-50-25-1](https://asc.understandingaccounting.org/asc/860/50/#860-50-25-1) apply even if it is not customary to charge a contractually specified servicing fee. Example 1, Case C (paragraph [860-50-55-25](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-25)) illustrates a transaction in which a transferor agrees to service loans without explicit compensation. ##### [860-50-55-6](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:ea0dca900c4e39509c0bb9f2386ba0c3be90450372ca21a44a260c7167ee5570 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following guidance addresses transactions in which servicing assets are assumed without cash payment, and the appropriate offsetting entry by the [transferee](https://asc.understandingaccounting.org/glossary/t/#transferee "An entity that receives a financial asset, an interest in a financial asset, or a group of financial assets from a transferor."). ##### [860-50-55-7](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:cc5944e19ee9cfad3a8375f8b7c9f4eb76c198b7ab1684ed254997b19ffdd8de Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The offsetting entry depends on whether an exchange or capital transaction has occurred. If an exchange has occurred, then the transaction should be recorded based on the facts and circumstances. For example, the servicing asset may represent consideration for goods or services provided by the transferee to the [transferor](https://asc.understandingaccounting.org/glossary/t/#transferor "An entity that transfers a financial asset, an interest in a financial asset, or a group of financial assets that it controls to another entity.") of the servicing. In that case, the offsetting entry by the transferee would be the same as if cash was received in exchange for the goods and services (that is, revenue or a liability as appropriate). ##### [860-50-55-8](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:45603bd31fd8ed3749070fb73854dd6c5bd74a5235925a74adbbcafe0e6f3314 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The servicing assets also might be received in full or partial satisfaction of a receivable from the transferor of the servicing. In those cases, the offsetting entry by the transferee would be to [derecognize](https://asc.understandingaccounting.org/glossary/d/#derecognize "Remove previously recognized assets or liabilities from the statement of financial position.") all or part of the receivable satisfied in the exchange. Another possibility is that an investor is in substance making a capital contribution to the investee (the party receiving the servicing asset, that is, the transferee) in exchange for an increased ownership interest. In that case, the investee should recognize an increase in equity from a contribution by owner. ##### [860-50-55-9](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:5af448b1ed598385e43c4f80f4569e3214aff6690b4771008bad2be1bbf52354 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). ##### [860-50-55-10](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:8508f7b3525af6457cc033b44823a4d3a2cec67f21559b47996a3f1f7cd1b7a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A transferor may transfer mortgage loans in their entirety to a third party in a transfer that is accounted for as a sale and undertake an obligation to service the loans. After the transfer, the transferor enters into a subservicing arrangement with a third party. ##### [860-50-55-11](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:09e63e18b6b12d6b70955a9bf2b7e4a7c84916ffc53b566b777baf70ce32f45e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the transferor's benefits of servicing exceed its obligation under the subservicing contract, that differential shall not be accounted for as an interest-only strip. Rather, the transferor should account for the two transactions separately. First, the transferor should account for the transfer of mortgage loans in accordance with Subtopic 860-20. The obligation to service the loans should be initially recognized and measured at fair value according to paragraph [860-50-30-1](https://asc.understandingaccounting.org/asc/860/50/#860-50-30-1) as proceeds obtained from the sale of the mortgage loans. Second, the transferor should account for the subcontract with the subservicer. ##### [860-50-55-12](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:7fb9101e85a9d74db0bb3f4d8ddb9678431c29f71b6c1d25b8089d3202f422fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraphs 860-50-55-12 through 55-19 superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-12). #### Illustrations ##### [860-50-55-20](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:f457adc3d2885b0d3d073a5475f96dd4d50f27bc0212140407a84a896190ed4d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate the guidance in paragraph [860-50-25-1](https://asc.understandingaccounting.org/asc/860/50/#860-50-25-1): 1. a Transferor continues to service the loans (Case A). 2. b [Subparagraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). 3. c Future benefits of servicing do not provide adequate compensation (Case C). ##### [860-50-55-21](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-21) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:7dfa255033628f65d852999d8257d9b34657b9b65551beed4b48b4349269ec21 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A originates $1,000 of loans that yield 10 percent interest income for their estimated lives of 9 years. Entity A transfers the entire loans to an unconsolidated entity and the transfer is accounted for as a sale. ##### [860-50-55-22](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-22) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:ba85dc746ecf830de7c7869ce50d17b6762d30d02457eb4b94d2ebf9ac880341 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A receives as proceeds $1,000 cash, a beneficial interest to receive 1 percent of the contractual interest on the loans (an interest-only strip receivable), and an additional 1 percent of the contractual interest as compensation for servicing the loans. The fair values of the servicing asset and the interest-only strip receivable are $40 and $60, respectively. This Case illustrates Entity A's (the transferor's) accounting for a sale with the servicing obtained by Entity A (the transferor), as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-95EEAD42-FE4D-4FFD-A2A4-816ABFE801DF-low.gif) Fair Values Cash proceeds " $1,000 " Servicing asset 40 Interest-only strip receivable 60 Net Proceeds Cash proceeds " $1,000 " Servicing asset 40 Interest-only strip receivable 60 Net proceeds " $1,100 " - ![](https://asc.understandingaccounting.org/asc-img/GUID-85B70517-0F14-4D07-9CB6-E20D7D1DDF84-low.gif) Gain on Sale Net proceeds " $1,100" Less: Carrying amount of loans sold " (1,000)" Gain on sale $100 - ![](https://asc.understandingaccounting.org/asc-img/GUID-31E9A69F-B022-4522-B3B3-EC7223116D52-low.gif) Journal Entries Cash " $1,000 " Interest-only strip receivable 60 Servicing asset 40 Loans " $1,000 " Gain on sale 100 To record transfer and to recognize interest-only strip receivable and servicing asset ##### [860-50-55-23](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-23) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:5287f6b76f89b8b8bb130fa4f9994e7af0e4ab6081bf37b6efd710bea9beb923 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). ##### [860-50-55-24](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-24) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:79260132896aa6d6232b4453921640a8b400e35deac1c16d5665611a8f45b44c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/). ##### [860-50-55-25](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-25) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:0996a788c7fed0383d720efaa14ce6ef093a1de68d53800ca5186594c8cb4007 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transferors sometimes agree to take on servicing responsibilities when the future benefits of servicing are not expected to adequately compensate them for performing that servicing. In that circumstance, the result is a servicing liability rather than a servicing asset. ##### [860-50-55-26](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-26) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:f2b9fbd6ec7ab6d3ef70d85c29ea13145626d61cc8b8d56455a2a051794a0614 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, if in the transaction illustrated in paragraphs [860-20-55-43 through 55-45](https://asc.understandingaccounting.org/asc/860/20/#860-20-55-43) , the transferor (Entity A) had agreed to service the loans without explicit compensation and it estimated the fair value of that servicing obligation at $50, net proceeds would be reduced to $980, gain on sale would become a loss on sale of $20, and the transferor would report a servicing liability of $50. ##### [860-50-55-27](https://asc.understandingaccounting.org/asc/860/50/#860-50-55-27) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:28.630Z to 2026-09-10T02:08:28.630Z Record version: sha256:cb9386c68e1dfc0cf5838d408a93e0ea25f6580d91a1101d1646e665e7e7eb97 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2009-16](https://asc.understandingaccounting.org/updates/asu-2009-16/).