How should an analyst deal with DT liabilities or assets?

Reversal:
· If they are expected to reverse in the future, they should be treated as normal liabilities or assets.
· If they are not expected to reverse in the future, remove the DT liability from liabilities and add it to equity. Remove the DT asset from assets and subtract it from equity.e.g. if DT liability is soley from the used of acceleration depreciation method.
· Depreciation for tax purpose and the company’s capital expenditures are expected to grow in foreseeable future, DT liability will not reverse and should be considered as equity

Present value:
· Even if DT liability is reversable, it is valued at undiscounted basis but the payment may occur far into the future, analyst should revalue the liability at PV.

Economic depreciaton:
· Accouting depreciaton may understate the true economic value, depreciation value and so overstate the true value of the company