XM Radio was depreciating its satellites over 20 years (total cost of $20 million), for each of five satellites, useful life is only seven years due to the intensity of the sun rays.

With reference to the scenario, answer the following questions:

1. What is the accounting implication in the situation and why?
2. What promulgated accounting standards should be followed? Provide your rationale.
3. How and when should this discovery be recorded in the financial statements of the company? Explain your response.
4. If the company issues quarterly financial statements and the discovery is made in the third quarter, should this impact be shown prospectively or retroactively and in what specific time period? Explain your response .
5. As the accountant what would you recommend to management and why? Be sure to address the accounting implications, explaining your rationale.