Useful life
The period over which an asset is expected to be available for use by an entity, which is an accounting estimate about that entity and not a property of the equipment.
IPSAS 45 defines useful life as the period over which an asset is expected to be available for use by an entity, or the number of production units expected to be obtained from it. Both readings are entity-specific. The same chiller in two organisations can carry two different useful lives without either being wrong, because the estimate is about expected use rather than about the machine.
It is not a fact to be looked up, and the standard treats it accordingly. Paragraph 48 requires the useful life to be reviewed at least at each annual reporting date, and any change to be accounted for as a change in an accounting estimate rather than as a correction. That requirement is the tell: a number that had to be reviewed every year was never intended to be a permanent property of the asset.
The engineering vocabulary for the same territory is finer. ISO 15686-1 separates design life, the service life intended by the designer, from service life, the period after installation during which the thing meets its performance requirements, from reference service life, what it achieves under a stated reference set of conditions, from estimated service life, that reference figure adjusted for the conditions actually present. Four terms, because the difference between them is where the money is.
The same term, through four lenses
01
Project
the delivery team and the contract
The project sets a design life in the brief and specifies to it. It is an instruction to the designer, stated before anything is built and tested by nothing afterwards.
Nobody on the project will be present when the figure is tested, which is why it is the least examined number of the four despite being the earliest and the most consequential.
Fixed by
ISO 15686-1:2011, 3.3: design life is the service life intended by the designer, as stated to the client to support specification decisions.
Read the sources
- ISO 15686-1:2011, service life planning, general principles2011, edition 2; FDIS replacement expected 2026; read 2026-09-05.The published preview runs to the end of Clause 4, so the whole of Clause 3, terms and definitions, is free to read. That is where design life, service life, estimated service life and reference service life are separated.
Recorded in
The employer's requirements and the design brief.
02
Engineering
design, commissioning and the technical record
Engineering distinguishes what was intended from what is achieved. Service life is the period after installation during which the asset meets its performance requirements. A reference service life is what a component achieves under a stated reference set of in-use conditions; an estimated service life is that figure adjusted for the conditions the asset is actually in.
The adjustment is not a rounding. A centrifugal chiller in the ASHRAE database reports two different things for it. The 209 units still in service have a mean age of 17.6 years, ages running from 3 to 41, which is how old they are so far and not how long they will last. The 30 units that were replaced lived a mean of 25.2 years, lives running from 7 to 42. Any single figure quoted from those columns is a choice, and the spread is the useful part.
Fixed by
ISO 15686-1:2011, 3.7, 3.22 and 3.25, and the factor method of ISO 15686-8 for adjusting a reference life to specific conditions. ASHRAE Service Life and Maintenance Cost Database for observed values, reported with standard deviation and range.
Read the sources
- ISO 15686-1:2011, service life planning, general principles2011, edition 2; FDIS replacement expected 2026; read 2026-09-05.The published preview runs to the end of Clause 4, so the whole of Clause 3, terms and definitions, is free to read. That is where design life, service life, estimated service life and reference service life are separated.
- ASHRAE Service Life and Maintenance Cost Databaselive database; read 2026-09-26.Free. Observed service lives from 345 buildings, reported as mean, median, standard deviation and range, separately for equipment still in service and equipment replaced. Built to supersede the 1978 Akalin survey table.
Recorded in
The service life plan, if one exists, and the design calculations.
03
Finance
the accounts and the fixed asset register
Finance holds the only version with a legal consequence. The useful life divides the depreciable amount, so it sets the annual charge on the largest line of most public balance sheets, and it is an estimate about this entity rather than about the equipment.
IPSAS 45 requires it to be reviewed at least at each annual reporting date, along with the residual value, with any change accounted for as a change in an accounting estimate. In practice the review is the step most often skipped after a conversion: the lives set once, under deadline, to produce an opening balance sheet, are the lives still running years later.
Fixed by
IPSAS 45, paragraph 8 for the definition, paragraph 47 for allocating the depreciable amount over it, and paragraph 48 for the annual review of both useful life and residual value.
Read the sources
- IPSAS 45, property, plant and equipment2023, effective 1 January 2025; read 2026-09-01.Free in full, with its Basis for Conclusions in the same document. Replaced IPSAS 17 from 1 January 2025.
Recorded in
The fixed asset register, one figure per depreciated component.
04
Operations
the people who run and maintain it
Operations does not use a life at all. It uses a replacement interval, which is a plan, and a condition assessment, which is an observation. The asset is replaced when it fails too often, costs too much to keep, or no longer meets the requirement, whichever arrives first.
That is the only one of the four that is ever tested against reality, and it is the one with no reporting obligation attached. IPSAS 45 paragraph 49 makes the connection explicit in the other direction: where maintenance policies exacerbate wear, the useful life should be reassessed. The operator holds the evidence that the accounting estimate is wrong.
Fixed by
ISO 55001:2024, Clause 8, planning and controlling operation, with the renewal decision informed by condition and criticality. IPSAS 45, paragraph 49, on reassessing useful life where maintenance policy affects wear.
Read the sources
- ISO 55001:2024, asset management system requirements2024 edition; read 2026-09-26.ISO’s product page: the publication details and ISO’s own summary of the standard, not the requirement text. The contents, foreword and introduction cited in this publication are taken from the standard’s preview pages hosted on the ANSI webstore, not from this page.
- IPSAS 45, property, plant and equipment2023, effective 1 January 2025; read 2026-09-01.Free in full, with its Basis for Conclusions in the same document. Replaced IPSAS 17 from 1 January 2025.
Recorded in
The renewal plan and the condition assessment, in the maintenance system.
Where the lenses part
Finance against Operations
Finance holds a life it must review annually; operations holds the evidence that would inform the review. They are rarely the same meeting. An asset can be fully depreciated and running well, or carrying years of book value and scheduled for replacement, and both states are common enough to be unremarkable. Each is a statement that the annual review required by paragraph 48 has been performed as an arithmetic exercise rather than an examination.
Engineering against Finance
Engineering can supply a distribution, because that is what observed service life data is: a mean, a standard deviation and a range across a named population. Finance needs a single figure per component to divide into a depreciable amount. The reduction from one to the other is a judgement about this asset in these conditions, and it is usually made by taking a table value, at which point the distribution and its caveats are discarded and only the point estimate survives.
Project against Engineering
Design life is an intention stated before construction; service life is what is achieved after it. ISO 15686-1 keeps them apart deliberately, and deprecates "intended service life" and "expected service life" as synonyms for design life precisely because the collapse is so easy to make. A design life quoted years later as though it were an observation is the same error the standard was drafted to prevent.
What has to agree, and how you would know
| The datum | Held by | The test |
|---|---|---|
| The life figure itself | Finance, Operations, Engineering | For one component, put three numbers side by side: the useful life in the fixed asset register, the replacement interval in the renewal plan, and the published service life for that equipment type with its range. If all three match exactly, one was copied from another and the coincidence is the finding. |
| The basis of the estimate | Finance | Ask what evidence supports the useful life on the register, and when it was last examined. IPSAS 45 paragraph 48 requires the review annually. A register whose lives have not changed since conversion has either been reviewed and confirmed, which produces a record, or not reviewed, which produces none. |
| Conditions of use against the reference conditions | Engineering, Operations | Compare the in-use conditions the published life assumes against the ones the asset is actually in: ambient temperature, duty cycle, water quality, maintenance regime. Where they differ materially, ISO 15686-8 exists to adjust the figure, and the unadjusted number on the register is a reference value being used as if it were an estimate. |
Sources
IPSAS 45, Property, Plant, and Equipment, definition of useful life in paragraph 8 and the annual review requirement at paragraph 48, with the depreciation method reviewed under paragraph 58. ISO 15686-1:2011, Buildings and constructed assets, service life planning, Clause 3, terms and definitions, for design life (3.3), estimated service life (3.7), reference service life (3.22) and service life (3.25). ASHRAE Service Life and Maintenance Cost Database, service life data by equipment type from 345 reporting buildings.
Read the sources
- IPSAS 45, property, plant and equipment2023, effective 1 January 2025; read 2026-09-01.Free in full, with its Basis for Conclusions in the same document. Replaced IPSAS 17 from 1 January 2025.
- ISO 15686-1:2011, service life planning, general principles2011, edition 2; FDIS replacement expected 2026; read 2026-09-05.The published preview runs to the end of Clause 4, so the whole of Clause 3, terms and definitions, is free to read. That is where design life, service life, estimated service life and reference service life are separated.
- ASHRAE Service Life and Maintenance Cost Databaselive database; read 2026-09-26.Free. Observed service lives from 345 buildings, reported as mean, median, standard deviation and range, separately for equipment still in service and equipment replaced. Built to supersede the 1978 Akalin survey table.