Amortisation
The systematic write-off of an intangible asset's cost over its useful life, the intangible equivalent of depreciation.
Formula
Annual Amortisation = Cost of Intangible Asset / Useful Life in Years
Unit
₹ crore
In depth
Amortisation applies to intangibles with finite lives — software, patents, licences, customer contracts acquired in a takeover — while indefinite-life intangibles such as goodwill are tested for impairment instead of amortised. Because acquisitions create intangibles that must then be amortised, an acquisitive company shows lower reported profit than an organically identical one, which is why analysts sometimes examine profit before amortisation of acquired intangibles. Internally generated brands are not capitalised at all, so a company that built its brand shows no such charge while one that bought the same brand does. The word is also used for the repayment schedule of a loan, a completely separate meaning.
Worked example
A software licence costing ₹30 crore with a five-year life is amortised at 30 / 5 = ₹6 crore a year. Five years on, the balance sheet carries it at zero even though the licence may still be in daily use.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Amortisation” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.