Fundamental Glossary / Financial Statements
Amortization
The systematic charge that spreads the cost of an intangible asset, and sometimes of a loan's fees, over its life.
Formula
Cost of the finite-life intangible / useful life, unless another pattern of benefit is clearer.
What it means
Amortization is depreciation's equivalent for intangibles: software, licences, customer contracts, and capitalised development.
Goodwill is generally not amortised under Ind AS. It is tested for impairment. Older Indian GAAP did amortise goodwill. Know which framework the statements use.
How to read it
A business that must keep buying finite-life rights will show amortization forever. Treating it as a cost to ignore, the way some EBITDA users do, overstates the cash that can be distributed.
What to watch
Lengthening the life of capitalised software lifts current profit. It does not make the software more valuable.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.