Question

Write about how amortization of intangibles is done for different types of intangibles.

Answer 1

Amortization of Intangiables can be done using three Methods:

• Straight Line method
• Accelerated method
• Units-of-production method

Under Straight Line Method, Amortization expense is calculated as amortization cost divided by the asset’s estimated useful life and is the same for each period.

Under Accelerated method, allocation of amortisation cost will be higher in the Earlier years & then Declined in the later years.

Under units-of-production method, allocation of amortisation cost corresponds to the actual use of the asset in a particular period.

For Intangiables like Goodwil, we will not amortize but we test for impairment as we doesn't know the useful economic life of the asset.