Definition: The indefinite useful life of an asset means that the asset’s usefulness to the business is not limited by age, legal or regulatory obligations, contracts, or any other factory. In other words, the asset will last forever. It cannot be worn out and cannot be fully used up.
What Does Indefinite Useful Life Mean?
Very few assets have an indefinite useful life because more assets can age with time. Assets like cars and equipment get old, break down, and become worthless after a certain amount of time.
Land is the primary example of indefinite useful life. Land will also be there and will always be able to be used. Unlike a building, land cannot be used up. Land might be changed and landscaped differently for different purposes, but the land itself will always be there.
Some assets do not technically have an indefinite useful life, but we treat them as if they do. Take copyrights, patents, license, and other intangible assets for example. Disney has a copyright on Mickey Mouse and other early Disney cartoon characters that expire after a certain amount of time.
Normally, these copyrights would have a definite useful life since a copyright is only valid for the author’s life plus 50 years or 75 years for a corporate work. The Disney Corporation’s copyright on Mickey Mouse was set to expire and Disney successfully lobbied Congress to change the copyright law. As long as Disney can successfully protect its copyright, it will have an indefinite life.
The same is true for licenses. If a business’ alcohol license expires every few years, but the business plans and has the ability to renew it indefinitely, the license is considered to have an indefinite life.