Amortisation
Amortisation systematically allocates the depreciable amount of an intangible asset with a finite useful life over that life. Depreciable amount is cost, or another amount used as the starting basis, less residual value. Amortisation begins when the asset is available for use. The method should reflect consumption of benefits; straight line is used when that pattern cannot be determined reliably.
Worked example
A licence costing $12,000 with a three-year useful life and zero residual value produces $4,000 annual straight-line amortisation.
Common mistake
Amortisation allocates cost; it is not an attempt to track the asset’s market price. Indefinite-life intangibles are not amortised.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F2 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | FR | Direct | Official assessment-window verification pending |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F2 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Amortization