What is an asset’s useful life?

What is an asset’s useful life from income tax view and from company view for the purpose of depreciation.

Megrisoft Financial Consultant Asked on October 25, 2014 in Accounting.
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2 Answer(s)

Useful LifeĀ is the estimated lifespan of a depreciable fixed assetsĀ during which it can be expected to contribute to company operations. This is an important concept in accounting, since a fixed asset is depreciated over its useful life. Thus, altering the useful life has a direct impact on the amount of depreciation expense recognized per period.

As an example of useful life, a fixed asset is purchased at a cost of $10,000. The company controller estimates its useful life to be five years, which means that the business will recognize $2,000 of depreciation expense per year in each of the next five years. If the controller had instead stated a useful life of six years, the annual depreciation would instead have been $1,667.

Vikram Trainee Answered on October 30, 2014.
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Useful life usually refers to the duration for which the item will be useful (to the business), and not how long the property will actually last. Many factors affect a property’s useful life, including the frequency of use, the age when acquired and the repair policy and environmental conditions of the business.

Priyanka Gupta Accountant Answered on December 27, 2014.
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