“Amortization” is the process of expensing the cost of an Intangible Asset, such as Intellectual Property or Goodwill, incrementally over its useful life for accounting and tax purposes. Amortization is similar to Depreciation, which relates to the incremental expensing of Tangible Assets.
With Amortization, your company writes off incrementally the expense of the Intangible Asset over its useful life. As a result, your company’s accounting reflects more accurately the true cost of the Intangible Asset by tying it to the revenues that it generates over its useful life.
Amortization also refers to paying off Debt on a fixed schedule, such as the repayment of Principal and Interest on a Loan.