Interest Income

Category

Income Statement

Units

Currency

US-GAAP elements

InvestmentIncomeInterestInterestIncomeOperatingInterestAndDividendIncomeOperating

Reference

Regulation S-X Rule 5-03.7 (Non-operating income)

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

Interest income is the interest a company earns during a period on interest-bearing assets it holds, such as cash deposits, money market funds, government and corporate bonds, and loans or notes it has made to others. It is recognized as it is earned over time, not when payment is received.

For most companies it is a non-operating item that reflects the return on idle cash. For banks, lenders, and finance subsidiaries, it is the main source of revenue.

Regulation S-X Rule 5-03.7 lists interest on securities as one of the components of non-operating income that companies must state separately, either on the face of the income statement or in a note. Non-financial companies usually tag it in XBRL as InvestmentIncomeInterest, which covers interest on non-operating securities. When lending is part of the business, the amount is operating and is tagged InterestIncomeOperating or, for banks, InterestAndDividendIncomeOperating, which combines interest from loans, securities, and other sources with dividend income.

Interest income includes amortization of any discount or premium on debt securities bought below or above face value, so the recorded amount reflects the effective yield rather than just the coupon. Many companies do not show interest income on its own line. They net it against interest expense or fold it into other income, and the gross figure appears only in the notes.

The size of interest income depends mostly on cash balances and prevailing rates. For companies with large cash and investment holdings, a change in interest rates can move pretax income noticeably without any change in operations. That is why analysts often separate interest income from operating results and value a company's net cash on its own. Comparing interest income with average cash and investments gives a rough sense of the yield a company is earning on its liquidity.