Amortization Of Intangibles

The allocation of an intangible asset’s value expensed over its useful life. Here, an intangible asset is a non-physical item of value (think of things like patents, copyrights, intellectual property, etc.).

“I’d love to buy the rights to that comic book company’s catalog to make superhero movies,” says the Hollywood bigwig, “but my shareholders would never accept the $10 million hit to our profits for them.” Her accountant replies, “No problem...since they are intangible assets and you’ll make use of them for 20 years, you can amortize them for just a $500,000 annual expense, which will also provide a tax shield, which I’ll explain later…”