Amortisatsioonide

Amortisatsioonide, often translated as amortization, refers to the process of gradually writing off the initial cost of an asset over its useful life. This accounting practice is used for intangible assets like patents, copyrights, and goodwill, as well as for certain tangible assets, though depreciation is the more common term for tangible assets. The goal of amortization is to match the expense of an asset with the revenue it helps to generate over time, providing a more accurate picture of a company's profitability.

The amortization period is determined by the estimated useful life of the asset. For intangible assets acquired, the cost is spread evenly over this period. For example, if a company acquires a patent for $100,000 with a legal life of 20 years, it might amortize that patent over 10 years. Each year, $10,000 would be recorded as an amortization expense on the income statement, reducing taxable income. On the balance sheet, the accumulated amortization would be shown as a contra-asset account, reducing the book value of the patent.

Amortization is a non-cash expense, meaning it does not involve an actual outflow of cash in the current period. However, it impacts a company's net income and its tax liability. Understanding amortization is crucial for financial analysis, as it affects key financial ratios and the overall valuation of a company. Different accounting standards and jurisdictions may have slightly different rules regarding which assets are amortizable and the methods that can be used.