Question

What should be the pattern of amortization for a limited-life intangible?

Short answer

If the pattern in which the asset is consumed or used up can be reliably identified, the amount of amortization expensed for a limited-life intangible asset should mirror that pattern.

If it is impossible to discern the pattern of production or consumption, the straight-line approach of amortization should be utilized.

Step-by-step solution

Amortization

Amortization is a strategy used in accounting to reduce the book value of a loan or intangible asset over a predetermined period.

Limited-life intangible

Patents, copyrights, and goodwill are examples of intangible assets with a finite lifespan. The straight-line approach or the units of activity method is used to amortize these assets throughout the length of their useful lives.