Under accrual accounting, the “objectivity principle” requires financial reports to contain only factual data that can be verified, with no room for subjective interpretation. Note that the value of internally developed intangible assets is NOT recorded on the balance sheet. Under the process of amortization, the carrying value of the intangible assets on the balance sheet is incrementally reduced until the end of the expected useful life is reached. Similar to depreciation, amortization is effectively the “spreading” of the initial cost of acquiring intangible assets over the corresponding useful life of the assets. Intangible assets are defined as non-physical assets with useful life assumptions that exceed one year. How to Calculate Amortization of Intangible Assets
The Amortization of Intangible Assets is the process in which purchases of non-physical intangibles are incrementally expensed across their appropriate useful life assumptions.Ĭonceptually, the amortization of intangible assets is identical to the depreciation of fixed assets like PP&E, with the non-physical nature of intangible assets being the main distinction. What is Amortization of Intangible Assets?
