The 'bonus plan hypothesis' of Positive Accounting Theory suggests managers of firms with bonus plans tied to reported income are more likely to use accounting methods that:

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The 'bonus plan hypothesis' suggests that managers of firms with bonus plans tied to reported income are more likely to use accounting methods that increase current period reported income. This is because their bonus is based on the reported income in the current period, and therefore they have an incentive to make it as high as possible.

The 'Bonus Plan Hypothesis' of Positive Accounting Theory Suggests Managers