Abstract The article informs that the new investment credit which entered accounting thought as a result of the Revenue Act of 1962, has stimulated some penetrating thinking regarding the accounting nature of the tax credit which arises because of some financial or accounting move by a firm. In addition, there appears to be a direct relationship between the accounting treatment of the investment credit and so-called "deferred income taxes." While many accountants argue the merits of showing "deferred income taxes" as a liability or as a component of storkholders' equity, it seems to this writer that here again the only acceptable treatment is an integration of financial and tax accounting with the result of showing the "deferred income taxes" as contra asset. The first question to be resolved is how to measure the cost of the asset involved-be it one which is subject to the investment credit or one whose depreciation method gives rise to "deferred income taxes." The American Accounting Association has stated that the value of an asset is the money equivalent of its service potentials. Conceptually, this is the sum of the future market prices of all streams of service to be derived, discounted by probability and interest factors to their present worth.
Ronald M. Horwitz (Wed,) studied this question.