Glossary

Amortisation of intangibles

Amortisation spreads the cost of intangibles — goodwill, software, licences — over their useful life, the intangible equivalent of depreciation.

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Definition

Amortisation spreads the cost of an intangible asset — such as goodwill, software or a licence — over its useful life, in the same way depreciation spreads the cost of physical assets.

In plain terms

Buy something valuable but not physical — a brand, a software licence, goodwill from an acquisition — and its cost is written off gradually rather than all at once.

Why it matters for your company

Amortisation reduces reported profit without a cash outflow, and its tax treatment for intangibles like goodwill has specific rules. Understanding it matters when reading the accounts of acquisitive or software-heavy businesses.