Amortization begins when the recognized asset is available for its intended use, not automatically when cash is paid or a contract is signed. Build the schedule from gross carrying amount, supported residual value, readiness date, useful life, and the expected pattern of consumption.
For a $240,000 license ready on April 1 with a six-year useful life, zero residual value, and a stipulated straight-line pattern, a full annual amount is $40,000. A calendar-year entity records nine months, or $30,000, in the first year. The remaining carrying amount is $210,000 before any other adjustment.
That schedule verifies allocation. It does not prove the six-year life, zero residual value, readiness date, or absence of impairment. Those are controlled inputs whose source stays visible beside the formula.
Apply the distinction
A $240,000 license with no residual value and 72 months of supported use has monthly amortization of $3,333.33. Nine months produces $30,000, but only after the asset is available for use.
Authority
Read ASC 350-30-35-8 for the amortizable amount and residual-value rule.
Put the concept to work
Apply this concept
- Prepare and reconcile a finite-life intangible amortization schedule from supplied cost, residual value, readiness date, useful life, and consumption pattern.
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Build on these ideas
- Finite-lived intangible asset — Analyze
To apply this concept: Required. The allocation period and method depend on the supported finite-life conclusion.
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- Subsequent expenditure on an intangible asset — Analyze
Required level here: apply. Required. Capitalizing changes the amount amortized over the remaining life.