Practice Note 12: Useful Life of Infrastructure

‘Useful Life of Infrastructure’ is the twelfth in a series of Practice Notes prepared by the IPWEA NAMS Council. The objective of the Practice Note is to provide practitioners with the necessary principles and procedures to understand how useful life is used in asset management and financial management and reporting of infrastructure assets.

Useful life is the period over which an asset is expected to be available for use by an entity or the number of production or similar units expected to be obtained from the asset

The Practice Note will guide practitioners to generate more reliable useful life estimates to help their entities obtain more reliable annual depreciation expense and consequently more reliable operating results.

Determining the useful life of an infrastructure assets involves consideration of several factors:

• Expected usage of the asset
• Expected physical wear and tear
• Technical or commercial obsolescence, and
• Legal or similar limits on use of the asset.

There are no standard template answers for useful lives. The Practice Note includes example of typical useful life estimates as a reference guide. Entities need to determine useful lives of infrastructure assets to suit their circumstances and not just adopt a standard life. Useful lives can vary between entities and within an entity depending on the operational factors of an asset.

Useful lives are to be reviewed annually.

The Practice Note provides a methodology and template for assessing useful life based on the entity’s experience with similar assets to provide audit evidence of the review and justification of the adopted useful lives.