Difference between Economic Life and Useful Life of an Asset 14/09/13 23:05

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Difference between Economic Life and

Useful Life of an Asset Follow 516,485

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Difference between economic and useful life of an asset: Did

you know that these two terms have different meanings? Check
out the definitions when you click on "read more".

The IASB defines the two terms as follows:

Economic life is either:

(a) the period over which an asset is expected to be economically usable by one or more
users; or
(b) the number of production or similar units expected to be obtained from the asset by one or
more users.

Useful life is either:

(a) the period over which an asset is expected to be available for use by an entity; or
(b) the number of production or similar units expected to be obtained from the asset by
the entity.

Notice that the useful life of an asset is defined in terms of the assets expected usefulness to a
particular entity. Entities asset management policies usually involve the disposal/derecognition
of assets after a specified time or after consumption of a specified proportion of the future
economic benefits embodied in the asset.

Useful life is entity specific whereas economic life is not. Therefore, the useful life of an asset
can either be shorter than or equal to its economic life.

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