which is the best economical in our life
Answers
Answer : Economic life is the expected period of time during which an asset remains useful to the average owner. When an asset is no longer useful to its owner, then it is said to be past its economic life. The economic life of an asset could be different than its actual physical life. Thus, an asset can be in optimal physical condition but may not be economically useful. For example, technology products often become obsolete when their technology becomes obsolete. The obsolescence of flip phones occurred due to the advent of smartphones and not because they ran out of utility.
Estimating the economic life of an asset is important for businesses so that they can determine when it's worthwhile to invest in new equipment, allocating appropriate funds to purchase replacements once the equipment's useful life is met.
CORPORATE FINANCE & ACCOUNTING CORPORATE FINANCE
Economic Life
By JAMES CHEN Reviewed by EBONY HOWARD Updated Dec 14, 2020
What is Economic Life?
Economic life is the expected period of time during which an asset remains useful to the average owner. When an asset is no longer useful to its owner, then it is said to be past its economic life. The economic life of an asset could be different than its actual physical life. Thus, an asset can be in optimal physical condition but may not be economically useful. For example, technology products often become obsolete when their technology becomes obsolete. The obsolescence of flip phones occurred due to the advent of smartphones and not because they ran out of utility.
Estimating the economic life of an asset is important for businesses so that they can determine when it's worthwhile to invest in new equipment, allocating appropriate funds to purchase replacements once the equipment's useful life is met.
The economic life of an asset under the Generally Accepted Accounting Principles (GAAP) requires a reasonable estimate of the time involved. Businesses can shift their measurements based on the anticipated daily usage and other factors. The concept of economic life is also connected to depreciation schedules. Accounting standard setting bodies usually set generally accepted guidelines for estimating and adjusting this time period.
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