Amortiseeruvate

Amortiseeruvate is a Finnish term that translates to "to amortize" in English. Amortization is a fundamental accounting and financial concept that refers to the process of gradually expensing the cost of an intangible asset over its useful life. Unlike depreciation, which applies to tangible assets like buildings or machinery, amortization specifically relates to assets that lack physical substance but still hold economic value. Examples of intangible assets that are amortized include patents, copyrights, trademarks, software licenses, and goodwill acquired in a business acquisition.

The process of amortization involves spreading the cost of the intangible asset across the periods in which it is expected to generate revenue or provide benefit. This is typically done on a straight-line basis, meaning an equal portion of the asset's cost is expensed each accounting period. However, other methods may be used depending on the nature of the asset and its expected pattern of benefit consumption. The carrying value of the intangible asset on the balance sheet decreases over time as it is amortized, while amortization expense is recognized on the income statement, reducing a company's net income. This systematic allocation reflects the gradual consumption of the asset's economic value.