Useful life
Useful life is the period over which an asset is expected to be available for use by the entity, or the expected number of production units. Depreciation allocates the depreciable amount over the expected period or output of use. An entity may replace an asset before it physically fails, so useful life reflects its own expected use. Review residual value and useful life at least annually under IAS 16.
Worked example
An asset costing 100 with residual value 10 and useful life five years gives straight-line depreciation of 18 yearly.
Common mistake
Useful life is entity-specific and may be shorter than physical life; review estimates as required.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F2 | Supporting | July 2027–August 2028 |
| ACCA | F3 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | FR | Direct | Official assessment-window verification pending |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |