Glossary definition

What is amortisation?

Amortisation

In accounting, amortisation refers to the practice of spreading out the expense of an asset over a period of time that typically coincides with the asset’s useful life. Amortising an expense is useful in determining the true benefit of a large expense as it generates revenue over time. The amounts of each increment of a spread-out expense as reported on a company’s financials define amortisation expenses. Amortisation practices reflect a more accurate cost of doing business in a company’s financial reporting, as the benefits of an initial expense may continue long after the initial report of that expense.

A broader amortisation definition includes the process of gradually paying off a debt over a set amount of time and in fixed increments, commonly seen in home mortgages and auto loans.

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