Amortization Of Intangibles


DEFINITION of 'Amortization Of Intangibles'

A tax term relating to the practice of deducting the cost of an investment in a qualifying non-tangible asset over the projected life of the asset. The cost basis of the qualifying intangible asset is amortized over a 15-year period, irrespective of the actual useful life of the asset.

In the year the asset is acquired and sold, the amount of amortization deductible for tax purposes is prorated on a monthly basis. Intangible amortization is reported on Form 4562.

BREAKING DOWN 'Amortization Of Intangibles'

Intangible assets are typically nonphysical in nature and not easily assigned a value. According to Section 197 of the Internal Revenue Code, there are numerous qualifying intangible assets, but the most common are goodwill, the value of a worker's knowledge, trademarks, trade and franchise names, noncompetitive agreements related to business acquisitions and a company's human capital.

  1. Amortization

    1. The paying off of debt in regular installments over a period ...
  2. Goodwill

    An account that can be found in the assets portion of a company's ...
  3. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  4. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
  5. Cost Basis

    1. The original value of an asset for tax purposes (usually the ...
  6. EBITA

    Earnings before interest, taxes and amortization. To calculate ...
Related Articles
  1. Personal Finance

    Can You Count On Goodwill?

    Carefully examine goodwill and its sources before considering the value of your investment.
  2. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  3. Fundamental Analysis

    Accretion / Dilution Analysis: A Merger Mystery

    This analysis tool is an effective way to value mergers and acquisitions. The deal's on the table, but should you sign the papers?
  4. Economics

    Calculating Days Working Capital

    A company’s days working capital ratio shows how many days it takes to convert working capital into revenue.
  5. Investing

    What is EBITA?

    EBITA measures a company’s full profitability before reducing it by interest, taxes and amortization considerations, and so is useful for calculating a company’s internal efficiency or profitability ...
  6. Term

    What Is Financial Performance?

    Financial performance measures a firm’s ability to generate profits through the use of its assets.
  7. Investing

    How to Effectively Monitor Your Stock Holdings

    Investors should concentrate on the business, not the stock price.
  8. Economics

    Understanding Explicit Costs

    Common examples of explicit costs include wages, utilities, rent, raw materials, and other direct expenses companies pay to conduct business.
  9. Stock Analysis

    These S&P 500 Companies Hold the Most Cash

    Large cash positions allow for many different options and here's why they are beneficial to shareholders.
  10. Investing Basics

    What Does Off-Balance Sheet Mean?

    Assets or debts that a company excludes from its balance sheet are off-balance sheet items.
  1. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ... Read Full Answer >>
  2. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  3. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  4. Are dividends considered an asset?

    Whether dividends paid on stock are considered an asset depends on which role you play in the investment: the issuing company ... Read Full Answer >>
  5. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  6. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!