What is the term for the accounting process of allocating the cost of an intangible asset over its useful life?

What is the term for the accounting process of allocating the cost of an intangible asset over its useful life?

• A. Depreciation
• B. Impairment
• C. Accretion
• D. Amortization Expense

Answer: (D)

Allocating the cost of an intangible asset over its useful life is amortization. This process spreads the asset’s cost as an expense over the periods that benefit from it, reducing the asset’s carrying value on the balance sheet and recognizing amortization expense on the income statement. Intangible assets with finite lives are amortized (often straight‑line), while indefinite‑lived intangibles aren’t amortized but may be tested for impairment. Depreciation applies to tangible assets, impairment is a write‑down when the asset’s recoverable amount falls below carrying value, and accretion relates to increasing a liability over time. The periodic charge is recorded as amortization expense.

Allocating the cost of an intangible asset over its useful life is amortization. This process spreads the asset’s cost as an expense over the periods that benefit from it, reducing the asset’s carrying value on the balance sheet and recognizing amortization expense on the income statement. Intangible assets with finite lives are amortized (often straight‑line), while indefinite‑lived intangibles aren’t amortized but may be tested for impairment. Depreciation applies to tangible assets, impairment is a write‑down when the asset’s recoverable amount falls below carrying value, and accretion relates to increasing a liability over time. The periodic charge is recorded as amortization expense.