Accounting for the "investment credit, Amending No. 2.";

              1. In December 1962 this Board issued Opinion No. 2 "Accounting for the 'Investment Credit.' " In this Opinion we said:
Some decision as to the nature of the investment credit, i.e., as to the substance of its essential characteristics, if not indis-pensable, is of great significance in a determination of its ac-counting treatment. We believe there can be but one useful conclusion as to the nature of the investment credit and that it must be determined by the weight of the pertinent factors, (paragraph 2)
2. The Opinion listed the possible interpretations which the Board had considered:
Three concepts as to the substance of the investment credit have been considered by the Board: (a) subsidy by way of a contribution to capital; (b) reduction in taxes otherwise appli-cable to the income of the year in which the credit arises; and (c) reduction in a cost otherwise chargeable in a greater amount to future accounting periods. (paragraph 3)
3. After noting the arguments in favor of each, the Board said:
We believe that the interpretation of the investment credit
as a reduction in or offset against a cost otherwise chargeable in a greater amount to future accounting periods is supported by the weight of the pertinent factors and is based upon existing accounting principles. (paragraph 9)
4. The Board concluded (paragraph 13) that the investment credit "should be reflected in net income over the productive life of acquired property and not in the year in which it is placed in service."
5. In January 1963 the Securities and Exchange Commission issued Accounting Series Release No. 96 in which it reported that in recognition of the substantial diversity of opinion among responsible persons in the matter of accounting for the investment credit the Commission would
21
Opinions
of the
Accounting Principles Board •
American institute of Certified Public
Accountants 666 Fifth Avenue, New York, N. Y. 10019
Copyright 1964 by American Institute of Certified Public Accountants, Inc.
March, 1964
No. 4
(Amending No. 2)
ACCOUNTING FOR THE "INVESTMENT CREDIT"