Amortization

Amortization is the process of decreasing an amount gradually (or in installments) to:

  1. Write down an expenditure. 
  2. Pay off a loan.
  3. Reduce the value of an Intangible Assets in a manner analogous to Depreciation.  NOTE: Intangible Assets do not ‘wear out’ so they do not depreciate.  Instead, Amortization is to spread the cost of the asset over the expected useful life, it is reported on the  Income Statement similar to Depreciation. (Impairment is a method of further reducing the value of an Intangible Asset.)

 

 

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