Amortization (accounting)

Common card · No. 309991

In accounting, amortization is a method of obtaining the expenses incurred by an intangible asset arising from a decline in value as a result of use or the passage of time. Amortization is the acquisition cost minus the residual value of an asset, calculated in a systematic manner over an asset's useful economic life. Depreciation is a corresponding concept for tangible assets. Methodologies for allocating amortization to each accounting period are generally the same as those for depreciation. However, many intangible assets such as goodwill or certain brands may be deemed to have an indefinite useful life and are therefore not subject to amortization (although goodwill is subjected to an impairment test every year). While theoretically amortization is used to account for the decreasing value of an intangible asset over its useful life, in practice many companies will amortize what would otherwise be one-time expenses through listing them as a capital expenditure on the cash flow statement...

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