Although it might seem logical that an asset and liability approach to accounting for the impact of income taxes would give some consideration to the time value of money (i.e., a deduction today is worth more to a reporting entity than a deduction ten years in the future), ASC 740-10-05-7 and ASC 740-10-30-8 specifically preclude entities from present-valuing or discounting when measuring deferred taxes. There are conceptual arguments both for and against discounting deferred taxes for the time value of money. A strong reason not to discount deferred taxes is that such discounting would involve numerous operational issues, including the selection of the appropriate discount rate. Most importantly, discounting would routinely require a reporting entity to undertake a detailed analysis of future reversals of temporary differences to determine the future years in which the deferred tax amounts would become taxable or deductible. The FASB did not believe that the benefit of discounting outweighed the effort required to achieve that benefit. As a result, the time value of money is not considered in the accounting for income taxes (aside from an assessment of whether a tax-planning strategy is prudent and feasible as discussed in TX 5.6.7.1).

While ASC 740 prohibits discounting deferred taxes, the relevant guidance on discounting income taxes payable or refundable is in ASC 835-30, Imputation of Interest. While ASC 835-30 generally requires discounting of payables and receivables with maturities in excess of a reporting entity's operating cycle, ASC 835-30-15-3(e) explicitly excludes “income tax settlements” from such guidance. Accordingly, income taxes payable or receivable would not be discounted.