Crash Course in Accounting and Financial Statement Analysis, Second Edition

Amortization

When a company acquires an intangible asset, such as a patent, trademark, or customer list, from which it expects to generate benefits over future periods, the cost of that asset is not simply recognized during the year it was acquired. Instead, it is spread over that particular asset’s useful life in the form of amortization expense in order to match the timing of the cost of the asset with its expected revenue generation.

Amortization is conceptually equivalent to depreciation and often lumped in with depreciation as Depreciation and Amortization (D&A).

Intangible Assets Include: Brand Franchise Trademarks Patents Customer Lists Licenses Goodwill

What About Internally Generated Intangible Assets? The value of internally developed intangibles cannot be accurately quantified, recorded, or amortized (think back to Coke, General Electric, Microsoft).