In accounting, amortization is the process that reduces the value of an intangible asset. Not all businesses have to deal with this. However, for those that do, amortization is an important procedure that must be carried out correctly to ensure financial statements are faithful representations of the business' financial situation.
Amortization shares a direct link with the matching principle. The rule states businesses must record expenses in the same period as the revenue they helped to earn. In other words, it is the business' responsibility to record relevant expenses within the same tax period as they used the amortized intangible assets for the sake of revenue-earning operations.
This site offers information designed for educational purposes only. The information on this Website is not intended to be comprehensive, nor does it constitute advice or our recommendation in any way. We attempt to ensure that the content is current and accurate but we do not guarantee its currency and accuracy. You should carry out your own research and/or seek your own advice before acting or relying on any of the information on this Website.