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Definition of 'Absolute Physical Life'
The length of time that it takes for an asset takes to become fully depreciated, at which time it provides no additional use. The absolute physical life is often taken into consideration when companies purchase assets. The measure is typically associated with assets that have low risk of becoming technically obsolete.
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Investopedia explains 'Absolute Physical Life'
When looking at the life of an asset, people can take contrasting perspectives. For example, let's examine a manager's decision to purchase new computers for his or her business. The manager may decide to base the decision on how long it will be until the computers become obsolete by conventional standards. On the other hand, if the manager isn't worried about having older technology, he or she may care only about the absolute physical life of the computers, which can be considerably longer.
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Appreciate the different methods used to describe how book value is "used up".
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Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
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