What does amortisation mean?
Amortisation is the accounting and financial practice of spreading the cost or value of something across a series of periods rather than recognising it all at once. In its most common sense, it refers to writing off the cost of an intangible asset — such as a patent, trademark, licence, or goodwill — incrementally over its expected useful life, so that expenses are matched with the revenue they help generate. In lending, amortisation describes the structured repayment of a loan through regular instalments, each covering interest plus a portion of the principal, as with a typical home mortgage. The term carries a distinctly technical, professional register: it appears in financial statements, loan agreements, and tax documents far more often than in casual speech. Closely related to depreciation, which applies to physical assets, amortisation is fundamental to how businesses report their finances accurately over time, making it essential knowledge for anyone reading accounts or taking out a long-term loan.
nounThe process of gradually writing off the initial cost of an intangible asset, or of a loan, over a fixed period through regular payments or charges.
- The gradual write-off of the cost of an intangible asset over its useful life in accounting.
- The repayment of a loan through regular instalments that cover both principal and interest.
"The company amortises the cost of its software licences over five years."
"The accountant prepared an amortisation schedule showing how each monthly payment splits between interest and principal."
"Under accounting standards, the firm must record annual amortisation of the goodwill acquired in the takeover."
Rarely pluralised; the singular is almost always sufficient since amortisation describes a process rather than a countable item.
"Different accounting policies may require separate amortisations for each class of intangible asset."
The word traces back to Latin 'mors' — death — because to amortise a debt was originally to 'kill it off' payment by payment until it was dead.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Etymology of amortisation
Amortisation derives from the medieval Latin verb 'amortire', formed from 'ad-' (towards) and 'mors' (death), meaning literally 'to kill off' — originally applied to extinguishing a debt or transferring property to a corporation so it would not revert upon a holder's death. The concept entered English legal usage in the late medieval period and became standard in accounting vocabulary from the nineteenth century onward. It shares its root with words such as 'mortgage', 'mortal', and 'immortalise', all stemming from the Latin 'mors'. The British spelling uses '-is-', while American English adopted '-iz-'.
Related word forms
How amortisation is actually used
Primarily used in formal financial, accounting, and legal contexts; rarely encountered in everyday conversation. The spelling with '-isation' is standard in British English, while American English uses 'amortization'.
Easily confused with amortisation
Depreciation applies to tangible assets such as machinery and buildings, whereas amortisation applies to intangible assets such as patents, goodwill, and software.
Amortisation is simply the British spelling (with an 's'); amortization is the American spelling (with a 'z') — the meanings are identical.