This paper focuses on the question of why firms would expend
resources trying to influence the determination of accounting
standards. A possible answer to this question is provided by the
government intervention argument, namely, that firms having
contact with governments, directly through regulations or
procurements, or indirectly through possible intervention, can
affect their future cashtlows by discouraging government action
through the reporting of lower net incomes.
The general findings in this paper have important implications
on the setting of financial accounting standards. As long as
financial accounting standars have potential effects on the firm's
future cashflow, standard setting bodies will be met by corporate
lobbying. The lobbying, and the standard committee will be forced
to defer the controversial topic.
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