In the context of asset depreciation, it refers to the period over which an asset subject to depreciation (depreciable asset) is expected to be used by an entity. Long-lived assets usually have long useful lives, such as buildings, plots of land, etc., and therefore in accounting treatment these assets are considered to have an indefinite life, and hence will not be written off or consumed over time (accounting-wise, depreciation of such assets, so to speak, is not recognized as an expense in the statement of income each accounting period. A useful life is an estimate of the productive life (service life) of an asset. It may be measured in terms of time, or units of output. When a useful life is expressed in terms of output units or unites of operation (operation hours of a machine), it refers to the number of production units an entity expects to derive or obtain from the use of an asset in its control.

Generally speaking, at the end of an asset’s useful life, it will need to be refurbished and repaired or disposed of (at residual value, if any).