Economic life is the period over which an entity expects to be able to use an asset, assuming a normal level of usage and preventive maintenance. Economic life can also refer to the number of units produced; for example, the economic life of a vehicle may be 100,000 miles, rather than three years.
The concept is used as the basis for the time period over which depreciation is charged against an asset. For efficiency reasons, every asset assigned to an asset classification may be assigned the same economic life. Doing so makes it easier to calculate the depreciation expense.
Economic life can be less than the physical life of an asset, since it may eventually become outmoded and so is no longer productive, even though the asset could theoretically still be used.
Economic life is also known as service life or useful life.