The article by Ross L. Watts and Jerold L. Zimmerman explores the factors influencing management's attitudes towards accounting standards, particularly in the context of corporate lobbying. The authors argue that management's incentives are central to understanding the determination of accounting standards. They identify several factors that affect management's welfare and, consequently, their decision to lobby for or against changes in accounting standards. These factors include taxes, regulation, political costs, information production costs, and management compensation plans. The authors develop a model that predicts that large firms experiencing reduced earnings due to changed accounting standards will favor the change, while all other firms will oppose it if the additional bookkeeping costs justify the cost of lobbying. The empirical results from corporate submissions to the FASB's Discussion Memorandum on General Price Level Adjustments support these predictions. The study highlights the importance of understanding management's incentives in the standard-setting process and suggests that larger firms are more likely to lobby for changes that increase their reported earnings, while smaller firms may oppose such changes if the benefits do not outweigh the costs.The article by Ross L. Watts and Jerold L. Zimmerman explores the factors influencing management's attitudes towards accounting standards, particularly in the context of corporate lobbying. The authors argue that management's incentives are central to understanding the determination of accounting standards. They identify several factors that affect management's welfare and, consequently, their decision to lobby for or against changes in accounting standards. These factors include taxes, regulation, political costs, information production costs, and management compensation plans. The authors develop a model that predicts that large firms experiencing reduced earnings due to changed accounting standards will favor the change, while all other firms will oppose it if the additional bookkeeping costs justify the cost of lobbying. The empirical results from corporate submissions to the FASB's Discussion Memorandum on General Price Level Adjustments support these predictions. The study highlights the importance of understanding management's incentives in the standard-setting process and suggests that larger firms are more likely to lobby for changes that increase their reported earnings, while smaller firms may oppose such changes if the benefits do not outweigh the costs.