Hi my name is Mandesa and welcome to TransLegal's lesson of the week.
Today I'm going to talk about the term useful life.
When you refer to the useful life of an asset you are also referring to the asset's economic life. Now this may not be the same as the physical life of an asset which actually may be longer than its useful life, but we're actually referring to how long the benefits of using the asset outweigh the costs of using the asset and it's important to know the useful life of an asset so that the costs of the asset can be depreciated over the useful life of the asset.
The useful life of an asset may be affected by, for example, technological changes. Changes in technology may make the costs of producing various items with certain assets more expensive than the benefits of using the asset to produce those items.
Or changes in consumer tastes, which mean that consumers no longer want the item that is produced by the asset so that continuing to use the asset is just too expensive.
Thirdly, the costs of repair in that it becomes too expensive to repair the asset. In other words, replacing the asset is actually a cheaper alternative than continuing to repair the asset. In the United States, the Internal Revenue Service has its own depreciation table in which it lists the useful life of many assets and these can be used by accountants in determining the useful life of an asset for accounting purposes.
Thank you very much. If you have any questions or comments please feel free to leave them in the box below and either myself or one of my colleagues will be very happy to get back to you. Thank you.