WHAT IS WASTING ASSET?

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A wasting asset is any asset which exists for a limited time and whose value decreases over time.

It is an asset with a predictable useful life not exceeding 50 years.

Wasting assets, also known as consumed assets, continue to lose their value throughout a predetermined useful life.

At the end of the wasting asset's useful life, it is expected that the residual value of the asset will be zero or insignificant.

Depreciation schedules are typically created by businesses to reflect the loss of value throughout a wasting asset's useful life

Fixed assets like vehicles, equipment, plants and property are called wasting assets and usually lose their value over time as a result of technological obsolescence or ageing.

The value of natural resources such as mines, quarries and forests decreases because of depletion in the number of resources they hold.

Hence, they are considered wasting assets. These asset has a finite lifespan and will lose gradually their value as the natural resource is exploited and the remaining supply is depleted.

The slow decline in natural resources' value is reflected through a process known as depletion. The depletion rate is typically used by the owner of these natural resources to determine the expected lifetime of the resources

Financial instruments like options are also known as wasting assets since they lose value over time and become worthless when they expire.

Another wasting asset is a life insurance policy which completely loses its value once it reaches its termination date.

Please take note that freehold property, and plant and machinery  with a useful life of more than 50 years are not considered to be wasting assets.

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