Amortisation

The systematic allocation of a tangible asset's cost over its useful life. Depreciation reduces the book value of physical assets such as machinery, vehicles, and buildings on the balance sheet while recording the expense on the income statement.

The present value of future tax savings arising from the amortisation of an intangible asset for tax purposes. The tax amortisation benefit is often added to the pre-tax value of an intangible asset in purchase price allocations and can represent a material component of the asset's overall fair value.

The estimated value of an asset at the end of its useful life or the end of a forecast period. In intangible asset valuation, residual value considerations are important for assets with finite lives, such as patents approaching expiration, as well as for terminal value calculations in discounted cash flow models.

The period over which an intangible asset is expected to contribute to future cash flows, determining the duration of amortisation. Useful life may be finite (e.g., a patent term) or indefinite (e.g., a perpetually renewed trademark), and its estimation requires careful analysis of technological, legal, and competitive factors.

The average remaining period over which a group of intangible assets is expected to contribute to cash flows, weighted by their individual fair values. WARUL is used in purchase price allocation to determine amortisation periods for acquired intangible assets and is required disclosure under several accounting standards.

The process of determining the period over which an intangible asset is expected to contribute to the cash flows of an entity, which governs the amortisation period under IAS 38 and ASC 350. Useful life may be finite (based on contractual, legal, regulatory, technological, or economic factors) or indefinite (when there is no foreseeable limit to the period over which the asset will generate net cash inflows).

A physical asset with a finite monetary value, such as property, plant, equipment, inventory, or cash. Tangible assets are recorded on the balance sheet at cost less depreciation.

The ongoing costs of running a business, including salaries, rent, utilities, marketing, and professional services. Unlike capital expenditure, OpEx is expensed immediately on the income statement.

Can you capitalise intangible assets on the balance sheet?

Yes, under IAS 38 and ASC 350, intangible assets can be capitalised when they meet specific recognition criteria — but internally generated goodwill and many R&D costs must be expensed.

What is the tax treatment of intangible assets and amortisation?

Under UK tax law, amortisation of certain intangible assets is tax-deductible; goodwill is not. Acquired intangibles (IP, customer contracts) typically qualify; internally developed intangibles must meet strict criteria.

What is the difference between tangible and intangible assets?

Tangible assets are physical items like machinery, property, and inventory. Intangible assets are non-physical items like patents, brands, software, and customer relationships that often represent the majority of a company's value.