Assets not depreciating

We talk a lot about depreciation, however, as the situation may be, there are assets which don’t depreciate at all. Those are assets that you can technically use for as long as they exist and their value for your business wouldn’t change (unless their market value changes, which is another matter). 

Assets that don’t depreciate are those with indefinite useful lives. Indefinite means more or less the fact that we are unable to determine the period the asset can be used, but we are certain that the limit is far. Assets with limited useful lives, periods we can reliably determine, are depreciating, however assets where we cannot with good reasoning limit the time they are useable, are not depreciated. One example when we talk about assets not depreciating is land. Land is never depreciated once it’s within your books. Pay attention however, if you only acquired the right to build on a land plot, you didn’t acquire land.

Defining assets with indefinite useful life isn’t all that complicated, but pay attention to the fact that you don’t overclassify assets as with indefinite useful lives. Matter of fact is that the trend is towards less and less assets being with unlimited useful lives.