Amortisation
Also called: amortization
What is Amortisation?
Amortisation spreads the cost of an intangible asset — software licences, goodwill, trademarks, a franchise fee — across the years it benefits. It is depreciation's counterpart for things you cannot touch.
Why Amortisation matters
Intangibles are a growing share of small business spending, from a POS licence to a brand fee. Expensing them entirely up front distorts the year of purchase and flatters every year after.
Amortisation formula
Annual amortisation = Cost of intangible asset ÷ Useful life in years
Usually straight-line over the contract or licence period.
How Amortisation works in practice
Use straight-line over the licence or contract term unless something else clearly fits better. The same word also describes a loan repayment schedule, which is a related but separate idea.
Frequently asked questions
Amortisation applies to intangible assets, depreciation to physical ones.