Amortization of Intangible Assets

Allocating the Cost of Finite-Life Assets

Amortization systematically allocates the cost of a finite-life intangible asset over the period expected to benefit from its use. Straight-line amortization is commonly applied unless another method better reflects the consumption of benefits.

Annual Amortization = (Cost − Residual Value) ÷ Useful Life

• Applies only to finite-life intangible assets.
• Usually uses the straight-line method.
• Recognized as amortization expense.
• Reduces carrying amount over time.