Useful life: Difference between revisions
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'' | 1. ''Financial reporting''. | ||
The length of time an asset is in use. | The length of time an asset is in use. | ||
The asset should be depreciated over its useful life. | The asset should be depreciated over its useful life. | ||
Under IFRS, IAS 16, factors relevant to determining a useful life include: | |||
:(a) Expected usage, | |||
:(b) Expected wear and tear, | |||
:(c) Technical or commercial obsolescence, | |||
:(d) Legal or regulatory limits on use (IAS 16, para 56). | |||
It is for the management of the reporting company to evaluate these factors and make their determination, subject to audit if the company's accounts are audited. | |||
Industry norms would certainly be relevant as well. | |||
Tax rules generally differ from the accounting rules, with the tax rules being much more prescriptive. | |||
Useful life is also sometimes known as ''useful economic life''. | |||
| Line 17: | Line 38: | ||
:''IAS 16 - Property, plant and equipment - paragraph 57.'' | :''IAS 16 - Property, plant and equipment - paragraph 57.'' | ||
2. ''Treasury - capital management - asset management.'' | |||
Similar concepts in wider economic, business and operational contexts. | |||
== See also == | == See also == | ||
* [[Accounting]] | * [[Accounting]] | ||
* [[Amortisation]] | |||
* [[Asset management]] | * [[Asset management]] | ||
* [[Business]] | |||
* [[Capital management]] | |||
* [[Depreciating asset]] | * [[Depreciating asset]] | ||
* [[Depreciation]] | * [[Depreciation]] | ||
* [[Economic life]] | * [[Economic life]] | ||
* [[Economics]] | |||
* [[Financial reporting]] | * [[Financial reporting]] | ||
* [[IAS 16]] | * [[IAS 16]] (Tangible assets - Property, plant and equipment) | ||
* [[IAS 38]] (Intangible assets) | |||
* [[Intangible]] | |||
* [[Judgement]] | * [[Judgement]] | ||
* [[Life]] | * [[Life]] | ||
* [[Operations]] | |||
* [[Property, plant and equipment]] | * [[Property, plant and equipment]] | ||
* [[Reporting entity]] | * [[Reporting entity]] | ||
* [[Short life asset]] | * [[Short life asset]] | ||
* [[Tangible]] | |||
* [[Tax depreciation]] | |||
* [[Treasury]] | |||
* [[Useful economic life]] | * [[Useful economic life]] | ||
* [[Utility]] | * [[Utility]] | ||
Revision as of 05:11, 10 August 2024
1. Financial reporting.
The length of time an asset is in use.
The asset should be depreciated over its useful life.
Under IFRS, IAS 16, factors relevant to determining a useful life include:
- (a) Expected usage,
- (b) Expected wear and tear,
- (c) Technical or commercial obsolescence,
- (d) Legal or regulatory limits on use (IAS 16, para 56).
It is for the management of the reporting company to evaluate these factors and make their determination, subject to audit if the company's accounts are audited.
Industry norms would certainly be relevant as well.
Tax rules generally differ from the accounting rules, with the tax rules being much more prescriptive.
Useful life is also sometimes known as useful economic life.
- Estimation of useful life for IAS 16 financial reporting is a matter of judgement
- "The useful life of an asset is defined in terms of the asset’s expected utility to the entity.
- The asset management policy of the entity may involve the disposal of assets after a specified time or after consumption of a specified proportion of the future economic benefits embodied in the asset.
- Therefore, the useful life of an asset may be shorter than its economic life.
- The estimation of the useful life of the asset is a matter of judgement based on the experience of the entity with similar assets."
- IAS 16 - Property, plant and equipment - paragraph 57.
2. Treasury - capital management - asset management.
Similar concepts in wider economic, business and operational contexts.
See also
- Accounting
- Amortisation
- Asset management
- Business
- Capital management
- Depreciating asset
- Depreciation
- Economic life
- Economics
- Financial reporting
- IAS 16 (Tangible assets - Property, plant and equipment)
- IAS 38 (Intangible assets)
- Intangible
- Judgement
- Life
- Operations
- Property, plant and equipment
- Reporting entity
- Short life asset
- Tangible
- Tax depreciation
- Treasury
- Useful economic life
- Utility
