BOP Program Statement 8563.08 § 6

a. Straight-line Depreciation Method. A method of allocating

depreciation whereby the cost of the asset is allocated uniformly

over the asset’s life. This method results in period charges of

equal amounts.

b. Estimated Useful Life. An asset’s estimated useful life is

the total number of years service expected from that asset.

Useful life is influenced by both physical factors (i.e., wear

and tear, deterioration) and operative factors (i.e.,

obsolescence, usefulness).

All property, plant, or equipment with a useful life of less

than five years, except for internal use software, must be

charged to expense when it is acquired. Internal use software

that has an estimated useful life of two or more years and meets

PS 8563.08

12/13/2001

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the requirements contained in the Program Statement on Machinery

and Equipment is to be capitalized.

c. Salvage (Residual) Value. The amount (dollar value) that

can reasonably be expected for the asset at the end of its useful

life. For depreciation calculation purposes, FPI assumes the

salvage value of all assets to be zero.

d. Idle Equipment. Equipment that is expected to remain idle

(out of use) for at least 90 days.