- (1) The process of making regular, periodic decreases in the book or carrying value of an asset. For example, when a bond is purchased at a price above 100, the difference between the purchase price and the par value, the premium, is amortized. Premiums are usually amortized in roughly equal amounts that completely eliminate the premium by the time that the bond has matured or by the call date, if applicable.(2) Liquidation of a loan or security by means of periodic reductions. The principal amount of loans is amortized by the periodic, usually monthly, payment of a fraction of the principal calculated to repay the entire amount of principal due by the date of the last scheduled periodic payment. Amortization methods differ based upon the type of loan. Mortgage loans and securities usually have level payments of principal and interest. For such amortizations, the interest consumes most of the early payments and, therefore, principal amortization increases as the loan ages. Many business loans use a level amortization with roughly equal principal reductions from each periodic payment. American Banker Glossary————The repayment of a loan by installments. Bloomberg Financial Dictionary
* * *amortization a‧mor‧ti‧za‧tion [əˌmɔːtaɪˈzeɪʆn ǁ ˌæmərtə-] also amortisation noun1. [countable, uncountable] ACCOUNTING when an asset is amortized:
• The law provides for five-year amortization of the first $5 million of acquisition expenses.
• The drop in operating profit reflected a rise in amortizations, following an increase in industrial investments.2. [uncountable] FINANCE when repayments are made on a loan:
• The lenders will extend the term of the loan and reduce the amortization of that debt.
• He asked for a change in the amortization schedule, with interest payments spread over a longer period.— see also earnings before interest, tax, depreciation and amortization
* * *The reduction of principal or debt at regular intervals. This can be achieved via a purchase or sinking fund. The term is also used to describe the depreciation of fixed assets; the opposite of accretion. ► See also Depreciation.
* * *amortize UK US (UK also amortise) /əˈmɔːtaɪz/ verb [T]► ACCOUNTING, TAX to spread the value or cost of an asset in accounts over a number of years: amortize sth over sth »
Companies use depreciation to amortize fixed assets over their usable life.»
The value of the machinery is amortized over its estimated useful life.► to reduce a debt by paying small regular amounts: »
When asked what tolls would be required to amortize the payments under the contracts, he said the figures were astronomical.amortization (UK also amortisation) /əˌmɔːtɪˈzeɪʃən/ US /æmˌɔːrṱə-/ noun [U]► »
Costs before depreciation and amortisation jumped 45% in a single year.
Financial and business terms. 2012.