Accounting value and real value rarely retire on the same day.
The Idea
Depreciation spreads an asset’s cost over its expected useful life for accounting purposes. A $3,000 server depreciated on a straight line over five years, with no salvage value, loses $600 of book value each year. Capital expenditure (CapEx) is depreciated this way, while operating expenditure (OpEx) is expensed as it’s incurred. Software and other intangible assets follow the same logic under a different name: amortization.
Useful life is an estimate, and accounting rules treat it as one. The international standard IAS 16 requires companies to review useful lives at least at each financial year-end. Large technology companies revise them in public. In 2025, Amazon shortened the useful life of a subset of its servers and networking equipment from six years to five, citing the pace of technology development in AI and machine learning. The change added $497 million in depreciation in the first half of the year.
In ITAM Terms
Book value and economic value (what the asset is actually worth to you) often diverge. Finance’s depreciation schedule often sets your refresh cycle. That’s convenient, but it’s an accounting convention, not an engineering or economic fact. Some assets deliver well past full depreciation; others become liabilities long before.
Where You’ll See It
- Hardware: A fully depreciated server that still runs fine has zero book value and positive economic value. Replacing it “because it’s off the books” may be waste. Meanwhile, a laptop too slow for current tools costs productivity daily, whatever its book value.
- Software: Capitalized software and implementation costs are amortized, which can make shelving a failed project painful on paper, since abandoning it means writing off what remains. The rules are changing: the Financial Accounting Standards Board’s ASU 2025-06 replaces the stage-based model for internal-use software with a principles-based test, effective for annual periods beginning after December 15, 2027. Ask finance how it will change what gets capitalized.
- Cloud and SaaS: The shift from CapEx to OpEx changes how spend hits the profit and loss statement and who approves it, which is part of why SaaS sprawl happens. A purchase that once needed a capital request can now go on a corporate card. The FinOps Foundation’s FinOps for SaaS addresses this decentralized purchasing and names ITAM and SAM teams as key partners in matching usage to entitlements.
- AI: GPUs may lose economic value faster than the accounting schedule assumes, as each new generation resets price-performance. The Amazon revision is one sign that schedules are starting to reflect this, and other operators may follow.
Governance Takeaway
Base refresh decisions on condition, performance, support status, and risk, with depreciation as one input. Coordinate disposals with finance: retiring an asset early can trigger a write-off they need to know about. Finance’s annual review of useful lives is a natural moment to bring your condition and performance data to the table.
Try This
List assets past full depreciation that are still in service. Which are bargains, and which are risks hiding behind a zero on the books?
