What is an amortization schedule?

Amortization schedules are used by lenders, such as financial institutions, to present a loan repayment schedule based on a specific maturity date. Intangibles are amortized (expensed) over time to tie the cost of the asset to the revenues it generates, in accordance with the matching principle of generally accepted accounting principles (GAAP).

What is amortization in accounting?

Amortization is an accounting technique used to periodically lower the book value of a loan or an intangible asset over a set period of time. Concerning a loan, amortization focuses on spreading out loan payments over time. When applied to an asset, amortization is similar to depreciation .

How is amortization recorded in a financial statement?

Amortization is recorded in the financial statements of an entity as a reduction in the carrying value of the intangible asset in the balance sheet and as an expense in the income statement . Under International Financial Reporting Standards, guidance on accounting for the amortization of intangible assets is contained in IAS 38.