+1 862 207 3288 In the paper Towards a Positive Theory of the Determination of Accounting Standards, Authors Ross L. Watts and Jerold L. Zimmerman want to develop a positive theory of the determination of accounting standards. Watts and Zimmerman used data from the companies which submit comments to the FASB’s Discussion Memorandum on General Price Level Adjustment(GPLA) to explore the factors that influence managements attitudes on accounting standards. These standards may affect firm’s benefit so the firms may decide to favor the standards or not. Watts and Zimmerman use a ma thematic model to test empirically what actions large firms will take when proposed accounting standards make the firms report less earnings. Through analysis, the authors confirm that firm size is the most important factor. The larger firms are more likely to support GPLA when the reported earning decrease. Mor…(short extract)
