What is amortisation?
Amortisation refers to the gradual reduction in value of intangible assets over time. It spreads the cost of the asset across its useful life.
What assets are amortised?
Amortisation applies to intangible assets such as patents, trademarks, copyrights, and goodwill.
Why is amortisation important?
It ensures that financial statements reflect the declining value of assets over time. This provides a more accurate view of profitability.
How is amortisation calculated?
The cost of the asset is divided across its useful life, often using a straight line method. This results in consistent expense recognition over time.
What is the difference between amortisation and depreciation?
Amortisation applies to intangible assets. Depreciation applies to tangible assets such as equipment and buildings.