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What is Amortization?

Amortization is the process of expensing the cost of an asset or loan over time.

Companies that have capital expenses for intangible assets, such as trademarks, patents, and licenses, may amortize the expense over the asset’s expected useful lifetime. For example, if you have a patent with a 10-year useful life, you may be able to write off a tenth of its total value each year.

Amortization is similar to depreciation, which is how companies write off the value of a tangible, fixed asset over its useful life.

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