Glass Ltd is suffering declining sales of its principal product, biodegradable recycled cardboard cartons. The managing director, Angela Smith, instructs the accountant, Jonty Upright, to lengthen asset lives to reduce depreciation expense. A processing line of automated cardboard pulping equipment, purchased for $7 million in January 2015, was originally estimated to have a useful life of 8 years and a residual value of $600 000. Depreciation has been recorded for 2 years on that basis. Angela wants the estimated life changed to 14 years total and the straight-line method continued. Jonty is hesitant to make the change, believing it is unethical to increase profit in this manner. Angela says, ‘The life is only an estimate, and I’ve heard that our competition uses a 14-year life on their production equipment.’

Required

(a) Who are the stakeholders in this situation?

(b) Is the proposed change in asset life unethical, or is it simply a good business practice by an astute managing director?

(c) What is the effect of Angela Smith’s proposed change on profit in the year of change?