|Difference between Economic Life and Useful Life of an Asset|
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 asset’s 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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