This paper considers the role of an agent choosing among reporting alternatives when that choice is unobserved by the principal, and the agent's compensation contract is optimal. The agent is allowed to take post-outcome costly actions which lead to more precise reports of actual profits than would be yielded by less precise, but costless conventional translations of outcomes (e.g., GAAP). The extent to which the principal allows the agent this discretion depends upon the improvement in profits as an indicator of the agent's pre-outcome effort when post-outcome actions take place versus the attendant cost of these actions.

Robert E. Verrecchia, On Timing and Selectivity: Discussion, The Journal of Finance, Vol. 41, No. 3, Papers and Proceedings of the Forty-Fourth Annual Meeting of the America Finance Association, New York, New York, December 28-30, 1985 (Jul., 1986), pp. 730-732