Final answer:
Interest income on investments is typically recognized when it is received, known as the cash basis of accounting. This contrasts with the accrual basis, where income is recorded when earned. International investment income is documented in the current account balance when paid out.
Step-by-step explanation:
When it comes to recognizing interest income on investments, generally, income is acknowledged when it is actually received. This is known as the cash basis of accounting, where transactions are recorded at the time the cash is received or paid, regardless of when the transaction actually occurred. This approach contrasts with the accrual basis, where income is recognized when it is earned, even if not received yet.
In the context of international investments, as described in the provided reference material, the flow of investment income is documented as part of the current account balance in financial payments between countries. This includes interest income from investments made abroad, which would be recognized when the investor actually receives the payment. Such realized interest income can play a notable role in the financial capital market.