The decrease in value of an intangible asset over time is known as which concept?

The decrease in value of an intangible asset over time is known as which concept?

• A. Depreciation
• B. Amortization
• C. Balance Sheet
• D. Assets

Answer: (B)

Amortization is the systematic write-off of the cost of an intangible asset over its expected useful life. This applies specifically to intangible assets like patents, trademarks, copyrights, or software that have a finite lifespan. Each period, a portion of the asset’s cost is expensed on the income statement as amortization expense, and the corresponding reduction is shown on the balance sheet, decreasing the asset’s book value over time. If an intangible asset has an indefinite life, it isn’t amortized; instead, it’s tested for impairment periodically. The other terms here refer to broader financial concepts—depreciation is for tangible assets, while the balance sheet and assets are the financial statements and categories that list resources, not the method ofExpense allocation over time. Therefore, the decrease in value of an intangible asset over time is amortization.

Amortization is the systematic write-off of the cost of an intangible asset over its expected useful life. This applies specifically to intangible assets like patents, trademarks, copyrights, or software that have a finite lifespan. Each period, a portion of the asset’s cost is expensed on the income statement as amortization expense, and the corresponding reduction is shown on the balance sheet, decreasing the asset’s book value over time. If an intangible asset has an indefinite life, it isn’t amortized; instead, it’s tested for impairment periodically. The other terms here refer to broader financial concepts—depreciation is for tangible assets, while the balance sheet and assets are the financial statements and categories that list resources, not the method ofExpense allocation over time. Therefore, the decrease in value of an intangible asset over time is amortization.