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Business Definition for: useful life
Dictionary of Accounting Terms
useful life

typical operating service life of an asset for the purpose it was acquired. The term usually applies to fixed assets. The useful life used for depreciation accounting does not necessarily coincide with the actual physical life or any commonly recognized economic life

See also depreciation , depreciable life
Dictionary of Finance and Investment Terms
useful life

estimated period of time during which an asset subject to depreciation is judged to be productive in a business. Also called depreciable life. The Modified Accelerated Cost Recovery System (MACRS) established useful lives for different property classes.

See also residual value
Dictionary of Real Estate Terms
useful life

  1. in appraisal, the economic period during which a positive cash flow is expected for the improvements.
  2. in accounting and taxation, the period to depreciate a building. See depreciation .

Example: A brick warehouse is expected to have a longer useful life than a wood-framed apartment building.

Dictionary of Business Terms
useful life

period of time over which a depreciable asset is expected to provide a competitive return. The Modified Accelerated Cost Recovery System allows depreciable lives for tax deduction purposes that are not necessarily related to the useful life of the property.

Related Terms:
depreciation

  1. spreading out of the original cost over the estimated life of the fixed assets such as plant and equipment. Depreciation reduces taxable income. Among the most commonly used depreciation methods are straight-line depreciationand accelerated depreciationsuch as the sum-of-the-years'-digits (SYD) methodand double declining balance method.
  2. decline in economic potential of limited life assets originating from wear and tear, natural deterioration through interaction of the elements,and technical obsolescence. To some extent, maintenance (lubrication, adjustments, parts replacement, and cleaning) may partially arrest or offset wear and deterioration.

depreciable life

economic or physical life of a fixed asset. All fixed assets except land are depreciated over the number of years of expected use.

residual value

  1. value of leased property at the end of the lease term.
  2. at any time, the actual or estimated value (that is, proceeds minus disposal costs) of an asset, also called salvage value.
  3. value of a depreciable asset after all allowable depreciation has been taken.

Referring Terms:
average life
economic life
normalwear and tear
Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.
 Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
 Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
 Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
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