Legal Definitions - wasting asset

A wasting asset is an item of value that naturally diminishes in worth over time, either because it is consumed, used up, or has a finite lifespan and cannot be replenished or replaced in its original form. Its value is expected to decline until it becomes worthless or is fully expended.

Here are some examples to illustrate this concept:

• Example 1: An Oil Field

  A company owns the rights to extract oil from a specific underground reservoir. This oil field is a wasting asset because, as oil is pumped out, the total amount of oil remaining in the reservoir decreases. Eventually, the field will run dry, and its value as an oil-producing asset will become zero. The oil cannot be naturally replenished at a rate that makes it a sustainable resource for commercial extraction.

• Example 2: A Copyright for a Novel

  An author holds the copyright to their bestselling novel. This copyright is a wasting asset because, in most jurisdictions, copyrights have a finite legal duration (e.g., the life of the author plus 70 years). As time passes, the remaining period of copyright protection shortens. Once the copyright expires, the work enters the public domain, and the author or their heirs no longer have exclusive rights to profit from it, causing the copyright's value to diminish to nothing.

• Example 3: A Fixed-Term Lease on a Commercial Property

  A business holds a 10-year lease on a prime retail space. This leasehold interest is a wasting asset. Each year that passes, the remaining term of the lease shortens. The value of the lease to the business (e.g., its ability to sublet or sell the remaining term) decreases as the expiration date approaches. Once the 10 years are up, the leasehold interest ceases to exist, and its value becomes zero, unless it is renewed or extended.