Financial Education

Specifically identifiable intangible assets such as copyrights and trademarks are generally recorded at acquisition cost and amortized over their useful life. Amortization has historically been similar to straight-line depreciation. For example, if a company acquired an intangible asset for $60,000 with an estimated life of 60 months, amortization expense of $1,000 would be recorded on a monthly basis. The unamortized balance would appear on the balance sheet as an intangible asset. After two years, for example, the balance would be $36,000. However, beginning in 2002 U.S. GAAP requires that intangible assets be amortized based on the pattern of benefits they are expected to generate. Thus, some intangible assets may be amortized in an accelerated fashion and others may show rising amortization expense over time.

For more information, see all articles on: Financial Statement Analysis, Fundamental Analysis

See also:

Accounting for Long-Term Intangible Assets: Capitalization vs. Expensing

Goodwill

Asset Impairment Charges

What is Depreciation and Amortization Expense?

Cash Flows from Investing Activities