What is Service Life?

Service life is the time period over which an asset is expected to be used. It is the basis for the depreciation of an asset, since depreciation only spans the service life of an asset. If there is a chance that an asset will become obsolete or fall into disuse later in its life, then its physical life may prove to be longer than its service life.

If an asset exceeds its service life, the manufacturer may refuse to support it. This situation arises because the manufacturer has not planned to retain service parts for such an extended period of time. Also, the proportion of units requiring more extensive maintenance tends to increase sharply, once their service life has been exceeded.

The concept of service life is especially important when conducting capital budgeting, since managers need to know when the support for their fixed assets will stop. At this point, it makes sense to replace assets with new ones that will be fully supported by the manufacturer.

Service Life Examples

Here are examples of service lives for different types of assets:

Office equipment. Computers, printers, and office furniture typically have a service life of 3 to 7 years, depending on usage and technological advancements.
Vehicles. Company cars, trucks, and delivery vans generally have a service life of 5 to 10 years, depending on mileage, maintenance, and wear and tear.
Machinery and equipment. Industrial machinery used in manufacturing often has a service life of 10 to 20 years, though it can vary based on maintenance and technological obsolescence.
Buildings. Commercial and industrial buildings typically have a service life of 30 to 50 years, though renovations and repairs can extend their usability.
Land improvements. Parking lots, fences, and landscaping features usually have a service life of 10 to 20 years, depending on environmental conditions and upkeep.
Software. Purchased or internally developed software generally has a service life of 3 to 5 years, as technology evolves rapidly.
Aircraft and ships. Airplanes and large vessels often have a service life of 20 to 30 years, influenced by usage intensity and maintenance schedules.
Leasehold improvements. Modifications to rented spaces (e.g., interior renovations) typically have a service life of the lease term or 5 to 15 years, whichever is shorter.

These service lives provide a basis for calculating depreciation, ensuring that asset costs are allocated appropriately over their useful periods.

Service Life Best Practices

A common accounting policy is to assign a standard service life to an asset, based on the asset class to which it is assigned. This standardizes the service lives being used for all assets, unless they are so unique that they cannot reasonably be assigned to any asset class.