The accounting term used to describe the expiration of intangible assets such as patents or goodwill is amortization.  As is the case with the depreciation of a tangible asset, the amortization of an intangible asset is shown on the income statement as an expense of the company; thereby reducing net income over the years this benefit is realized.

The term amortization is also associated with the elimination of a liability, typically a mortgage, over time.


One of the problems with calculating the amortization schedule for an intangible asset is determining their useful lives.  To help solve this problem, an intangible asset cannot be amortized over a time period that exceeds 40 years.  Amortization of intangible assets generally occurs on a straight-line basis.

Related Terms

income statement, expenses, depreciation, intangible assets, depletion expense