What is economic life?
Economic life of asset is a measure or prediction of the remaining time during which it will be economically applicable. It may be a shorter period than its physical life, because it can reach a point where its running costs outweigh its productivity. The principle of economic life is the same principle of depreciation, although both figures may vary due to legal accounting restrictions. In a situation, the person usually finds that the cost of car maintenance will increase as they get older and need more repairs. It can also attract increased taxes or higher premiums. Meanwhile, the car may prove less useful if it must be powered by slower speeds or spend more time in repair. Finally, the driver decides that the advantage he receives from Tauto does not justify operating costs.
The company will see its physical assets in the same way. The machine could theoretically still be useful for several years after it stops producing enough to justify its running costs. The computer could still work butHe could slow down to the extent that he was not sufficiently productive to justify the staff time spent by use.
Economic life is only a prognosis and is based on general, predictable bankruptcy samples. In fact, unpredictable factors could affect the economic life of the asset. If the market price of widgets collapses, a widget machine can become a widget. Alternatively, the government could make illegal use of a widget machine if its main parts are not replaced by steel.
These types of factors are not always included in the predictions of economic life, but there may be some exceptions. For example, the econoposity of the economic life of the injection form used to produce soda cans and the injection forms used to create a specific mobile phone can predict the economic life of the latter. This is because even though mobile phones sell at a higher rate,Each model is more likely to suffer from a decline in sales as aging and even outdated, causing the form to be unnecessary. Soda drink markets are likely to remain relatively stable and the form is likely to be usable, even if the popularity of individual brands is changed.