He trades
off present value and certainty advantages of receiving a bonus in period 1
against the foregone expected bonus in period 2. Conditional on the bonus
plan parameters, expected earnings before discretionary accruals in period 2,
the discount rate, and his risk aversion, the manager estimates a threshold
(denoted by L' in fig. 1) where he' is indifferent between reporting the
minimum and maximum accrual in period 1