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ACCOUNTING PRINCIPLES AND THE INVESTMENT CREDIT In 196a Congress enacted the invest-ment tax credit to stimulate industry's investment in capital assets. The Ac-counting Principles Board, in its Opin-ion No. 2, first decided that the credit, for accounting purposes, should be spread over the life of the related prop-erty rather than being all taken into income the year the property was pur-chased. A year and a half later Opinion No. 4 was issued, stating that this spreading or "deferral" method was still the preferred method, but that the cur-rent income or so-called "flow-through" method was also acceptable. Then, in September 1967, the Board published the exposure draft of an Opinion on ac-counting for income taxes, the invest-ment credit portion of which called for reversion to the deferral-only position. However, in December the Board set aside that portion for further study, leaving the alternatives still open. Your editors have felt that it might be useful to query Mr. Queen an about this somewhat perplexing sequence of events, and at the same time to gain further insight about how accounting thought develops. Interviewer: Mr. Queenan, throughout the more than five years since the in-vestment credit was enacted, when Mr. Powell was on the APB and then you, Haskins & Sells has been an energetic leader of the minority group 011 the Board that said "flow-through" is the proper accounting method. Would you say this action by the Board in setting aside the deferral-only proposal is a victory for our H&S position? Mr. Queenan: No, I don't think I would. The majority of the Board still favors deferral. On the other hand most of the thousand corporation executives and practitioners, and many of the edu-cators, who wrote to the Board about the matter favor flow-through. So the question is still entirely undecided. But I don't like the connotation of the word "victory." I don't think you should picture this as two opposing groups battling to a decision. That is not how accounting thought moves for-ward, at least not in my judgment. How did the Finn come to adopt its position? We spent a great deal of time analyzing all of its aspects. In the beginning, the law required that the credit be de-ducted from the cost of the property for figuring depreciation, so with the corporation tax rate at 52 per cent, a 4
Accounting principles and the investment credit: An Interview with John W. Queenan
Queenan, John W.
Investment tax credit -- United States
American Institute of Certified Public Accountants. Accounting Principles Board
Queenan, John W.
|Abstract||Photographs not included in the Web version.|
H&S Reports, Vol. 05, (1968 no. 1), p. 04-07
|Source||Originally published by: Haskins & Sells|
|Rights||Copyright and permission to republish held by: Deloitte|
|Format||PDF page image with corrected OCR scanned at 400 dpi|
|Collection||Deloitte Digital Collection|
|Digital Publisher||University of Mississippi Library. Accounting Collection|