Amortization
Allocation of intangible asset cost or loan principal over time, depending on the accounting or finance context.
Core concepts for allocating tangible and finite-lived intangible asset costs over their periods of use.
This section explains systematic asset-cost allocation. Start with Depreciation for tangible assets, Amortization for finite-lived intangible assets and other finance uses, or Depreciation and Amortization for a direct comparison.
Useful life, residual value, available-for-use date, method, and material components determine the schedule. Carrying amount does not equal market value, and a noncash add-back does not eliminate the need to acquire, maintain, or replace productive assets.
Financial-reporting and tax schedules can differ substantially. Use the applicable standards, accounting policy, asset register, and tax records before drawing conclusions. This section is educational and does not provide accounting, tax, audit, legal, valuation, or investment advice.
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Allocation of intangible asset cost or loan principal over time, depending on the accounting or finance context.
Depreciation allocates a tangible asset's depreciable amount across the periods in which the business expects to use it.
Depreciation and amortization systematically allocate tangible and finite-lived intangible asset costs over periods of use.
Straight-Line Depreciation is a widely-used method of allocating the cost of a tangible fixed asset over its useful life.