Is interest rate cap payment received by the borrower considered income?

[Jason Malabute]

Is interest rate cap payment received by the borrower considered income?

Is the following statement true:

Under Generally Accepted Accounting Principles (GAAP), interest cap premium payments received by the borrower are typically treated as a liability rather than income. Here is a possible journal entry for the borrower when receiving interest cap premium payments:

1. Initial receipt of interest cap premium payment:

   Debit: Cash (or a specific cash account) - Increase the cash asset account

   Credit: Unearned Interest Cap Premium (or a liability account) - Record the liability for the received premium payment

2. Recognition of interest expense over the term of the interest cap agreement:

   Debit: Interest Expense - Recognize the portion of the premium related to each accounting period 

   Credit: Unearned Interest Cap Premium - Reduce the liability account as the premium is recognized as an expense

   When a borrower first buys a cap rate it goes on the balance sheet (asset)  instead of the income statement right?