Three Ways to Look at Asset Life…and why it matters more than you think

Engineers, accountants, and operations leaders may use the same terms for asset life, yet they often mean entirely different things

How long will an asset last? It sounds straightforward, but anyone who has spent time in infrastructure planning knows it’s one of the most deceptively complex questions we face.

Reliability engineers, accountants, and operations leaders may use the same terms for asset life, yet they’re often talking about entirely different things—different assumptions, different incentives, different definitions of “truth.” When those perspectives stay siloed, organizations make decisions that look defensible on paper but fall apart in practice. When we reconcile them, we create clarity, strengthen our systems, and make investment choices that actually hold up in the real world.

An Insightful (and Typical) Meeting

The discussion started like many others. The engineer, Jeff, slid some data onto the screen and confidently stated that the pump in question had a mean time to failure of 27 years. The CFO, Karen, glanced down at her depreciation schedule and shook her head. “Our financial system shows a useful life of seven years. After that, the asset is fully depreciated.” Mike, the COO, sat back in his chair. He added his own experience: “These pumps don’t make it past 18 years in the field. Not with this duty cycle.”

Three professionals. Three facts. Three different “lifetimes” for the same physical asset.

I thought, “27, 7, and 18 years? For the same asset?”

The room fell quiet for a few minutes. The contradictions hung in the air. Then the questions began. Which number should we plan on? Who is right? And how do we make a decision that works across engineering, finance, and operations?

It's a scene we've witnessed countless times. The answer remains the same: all three are right, but for their own discipline.

1. Reliability Perspective: Calculating Mean Life

Reliability engineers calculate how long an asset should last based on failure data, statistical distributions, and population-level models.

Their core metric is mean life, whether expressed as:

·     MTTF (Mean Time to Failure) for non-repairable items

·     MTBF (Mean Time Between Failures) for repairable ones

Mean life is calculated by analyzing failure records across similar assets. It involves fitting statistical curves, often using Weibull analysis or exponential models. The result is a probabilistic average, not a prediction for any single asset.

A common planning heuristic is that mean life is roughly two‑thirds of service life. This holds for many mechanical assets with typical Weibull shape parameters, but it is not a universal reliability engineering rule.

The reliability engineering question is, “What is the inherent life of this asset, assuming ideal conditions?”

Mean life is powerful for modeling risk, setting critical spares strategies, and evaluating design options. But it’s rarely the number you should use for budgeting or replacement planning.

2. Accounting Perspective: Calculating Useful Life

Accounting focuses on economic usefulness, not physical longevity. The key measure is useful life, typically set by:

·     IRS depreciation schedules

·     GASB or FASB guidance

·     Industry norms

·     Organizational financial policy

Useful life calculations are grounded in capital recovery. It shows how quickly the organization should reclaim the investment on its balance sheet. For many assets, this period is much shorter than the physical life.

The accounting question is, “How long should we recognize value from this asset for financial reporting and capital budgeting?”

Useful life steers depreciation, replacement funding, and rate-setting. It is not intended to reflect how long the asset physically performs.

3. Operations Perspective: Calculating Service Life

Operations leaders calculate service life, the actual observed performance in the field.

This calculation is based on:

·     Duty cycles

·     Operating environment

·     Maintenance history

·     Performance degradation

·     Real failure dates

A common method is simple: track when assets were installed and when they were retired. More advanced approaches use condition assessments and predictive models to estimate remaining service life (RSL).

Condition assessments are usually performed to provide an indicator of remaining useful life.

The question that frontline operation and maintenance professionals ask is, “How long will this asset actually last in our real-world conditions?”

This number often sits between the accounting useful life and the reliability mean life. It’s also the most relevant for planning.

Bringing the Three Together

The goal isn't choosing which life is "right." The goal is to understand why each life exists and how to integrate them into decisions.

·     Mean life shows inherent reliability.

·     Useful life guides financial recovery.

·     Service life reflects operational reality.

Understanding Asset Life Makes You More Effective

High-reliability organizations (HROs) build bridges between these viewpoints. They align engineering, finance, and operations so that asset decisions are defensible, practical, and focused on long-term value.

It’s more than just knowing what you are doing or being "right." Understanding asset life is the foundation for clear communication. That is how you make better decisions.

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Need help getting started? JD Solomon Inc. provides practical solutions to align asset useful life and strengthen your asset management program.