lammortamento

Amortization, in accounting, is the systematic allocation of the cost of an asset over its estimated useful life. The term is used to describe two related concepts: amortization of intangible assets and, in some contexts, the gradual repayment of a loan (loan amortization). In Italian usage, the term ammortamento denotes both processes, with context distinguishing asset vs debt.

For intangible assets such as licenses, patents, software, or goodwill, amortization spreads the purchase cost over the period in which the asset is expected to contribute to revenue. The usual method is straight-line amortization: annual expense = (cost − residual value) / useful life. Other methods, such as declining balance or units of production, may apply, depending on policy and jurisdiction. Amortization affects the balance sheet through the accumulated amortization contra-asset account and reduces reported net income on the income statement.

For tangible assets, the corresponding term is depreciation in many accounting frameworks, while in Italian usage ammortamento is commonly used for both when referring to assets or debt. In loan accounting, amortization describes the gradual reduction of a loan balance through periodic payments that include both interest and principal; over time the interest portion falls and the principal portion rises.

Tax and reporting rules typically require a systematic amortization schedule, with useful life estimates reviewed regularly. If circumstances change, such as obsolescence or impairment, the asset’s carrying amount may be adjusted.

Example: a software license purchased for 50,000 with a five-year useful life; annual amortization would be 10,000 per year under straight-line method.

See also: depreciation, impairment, tax amortization.