Useful life
from class:
Financial Accounting I
Definition
Useful life is the estimated period over which a long-term asset is expected to be used before it is fully depreciated. It impacts financial statements through depreciation and asset valuation.
5 Must Know Facts For Your Next Test
- Useful life is an estimate and may be revised if circumstances change.
- It affects the calculation of depreciation expense on financial statements.
- Useful life can differ for tangible and intangible assets.
- Assets with a longer useful life will have lower annual depreciation expenses.
- Depreciation methods (such as straight-line or declining balance) rely on the useful life of an asset.
Review Questions
- What is the impact of useful life on depreciation expense?
- How can changes in useful life affect financial statements?
- What factors might lead to a revision of an asset's useful life?
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