In business accounting, amortization describes allocating the cost of a long-lived intangible asset over its useful life.
A company may amortize assets such as patents, copyrights, licenses, or certain acquired customer relationships. The expense systematically reduces the asset’s carrying amount over the period expected to benefit from it. A simple straight-line schedule allocates the same amount in each period, although other methods may apply when consumption follows a different pattern.
Amortization is often confused with depreciation. In common accounting usage, depreciation applies to tangible fixed assets such as buildings and machinery, while amortization applies to intangible assets. Both are non-cash expenses: recording the expense does not itself represent a payment in that period.
Some intangible assets have indefinite useful lives and are not amortized while that assessment remains appropriate. Instead, they are tested for impairment. Goodwill is a prominent example under many accounting frameworks, though special rules apply to some private companies and jurisdictions.