amortization

amortization
(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
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The repayment of a loan by installments. Bloomberg Financial Dictionary

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amortization a‧mor‧ti‧za‧tion [əˌmɔːtaɪˈzeɪʆn ǁ ˌæmərtə-] also amortisation noun
1. [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.

• Operating profits rose due to smaller amortization charges.

— compare depreciation, write-off
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

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   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.

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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.

→ Compare DEPRECIATE(Cf. ↑depreciate)
► 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.

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Look at other dictionaries:

  • Amortization — or amortisation is the process of decreasing, or accounting for, an amount over a period of time. The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo French amorteser , alteration of amortir , from Vulgar Latin… …   Wikipedia

  • amortization — I noun clearance, defrayal, defrayment, disbursement, discharge, extinction of a debt, extinguishment of claim, liquidation of a debt, payment, remittance, satisfaction associated concepts: amortization contract, amortization of a mortgage,… …   Law dictionary

  • Amortization — A*mor ti*za tion, n. [LL. amortisatio, admortizatio. See {Amortize}, and cf. {Admortization}.] 1. (Law) The act or right of alienating lands to a corporation, which was considered formerly as transferring them to dead hands, or in mortmain. [1913 …   The Collaborative International Dictionary of English

  • amortization — (n.) 1670s, in reference to lands given to religious orders, from M.L. amortizationem (nom. amortizatio), noun of action from pp. stem of amortizare (see AMORTIZE (Cf. amortize)). Of debts, from 1824 …   Etymology dictionary

  • amortization — [ə môr′tiz məntam΄ər ti zā′shən, ə môr΄təzā′shən] n. 1. an amortizing or being amortized 2. money put aside for amortizing a debt, etc.: also amortizement [ə môr′tiz mənt] …   English World dictionary

  • amortization — A cost *allocation method used to record the reduction in value of an asset over time. The classic case of amortization is the matching of the cost of an item of *property, plant, and equipment to its *useful life. Assets generally lose value as… …   Auditor's dictionary

  • amortization — / amortazeyshsn/ In accounting, the allocation (and charge to expense) of the cost or other basis of an intangible asset over its estimated useful life. Intangible assets which have an indefinite life (e.g., goodwill) are not amortizable.… …   Black's law dictionary

  • amortization — / amortazeyshsn/ In accounting, the allocation (and charge to expense) of the cost or other basis of an intangible asset over its estimated useful life. Intangible assets which have an indefinite life (e.g., goodwill) are not amortizable.… …   Black's law dictionary

  • amortization — /am euhr teuh zay sheuhn, euh mawr /, n. 1. an act or instance of amortizing a debt or other obligation. 2. the sums devoted to this purpose. Also, amortizement. [1665 75; < ML a(d)mortization (s. of admortizatio). See AMORTIZE, ATION] * * * In… …   Universalium

  • Amortization — The repayment of a loan by installments. The New York Times Financial Glossary * * * amortization a‧mor‧ti‧za‧tion [əˌmɔːtaɪˈzeɪʆn ǁ ˌæmərtə ] also amortisation noun 1. [countable, uncountable] ACCOUNTING …   Financial and business terms

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