In accounting, amortization is a method of obtaining the expenses incurred by an intangible asset arising from a decline in value as a result of use or the passage of time.
Methodologies for allocating amortization to each accounting period are generally the same as those for depreciation.
While theoretically amortization is used to account for the decreasing value of an intangible asset over its useful life, in practice many companies will amortize what would otherwise be one-time expenses through listing them as a capital expense on the cash flow statement and paying off the cost through amortization, having the effect of improving the company's net income in the fiscal year or quarter of the expense.
Under International Financial Reporting Standards, guidance on accounting for the amortization of intangible assets is contained in IAS 38.
[1] Under United States generally accepted accounting principles (GAAP), the primary guidance is contained in FAS 142.