am·​or·​ti·​za·​tion | \ˌa-mər-tə-ˈzā-shən also ə-ˌmȯr- \

Definition of amortization 

1 : the act or process of amortizing

2 : the result of amortizing

Examples of amortization in a Sentence

Recent Examples on the Web

The contractual revenue is before interest, tax, depreciation, and amortization, however, so actual numbers may be higher or lower. Megan Geuss, Ars Technica, "After working with Tesla’s Australia battery, wind company wants more batteries," 25 Sep. 2018 Adjusted earnings before interest, taxes, depreciation and amortization this year will be 570 million euros ($660 million) to 600 million euros, compared with a previous forecast of 640 million euros. Fortune, "Trump's Trade War Claims Another Victim," 28 June 2018 During his tenure, earnings before interest, taxes, depreciation and amortization hit $1 billion. Bloomberg,, "Toys R Us ex-CEO is trying to reboot the company, sources say," 25 June 2018 That's based on a 4.5 multiple of its forward earnings before interest, taxes, depreciation and amortization -- a bit below what Staples Inc. received in a recent LBO. Nick Turner And Caleb Mutua,, "GameStop confirms it's holding talks with potential suitors," 19 June 2018 Earnings before interest, taxes, depreciation and amortization rose 17% in the division. Lukas I. Alpert, WSJ, "News Corp Revenue Lifted by Real Estate and Book Units," 10 May 2018 On a group level, adjusted earnings before interest, taxes, depreciation, amortization this year will probably be in line with 2017, while sales will be little changed at about 35 billion euros ($43 billion), Bayer said. Naomi Kresge,, "Bayer CEO Sees Monsanto Approval as He Weighs More Asset Sales," 28 Feb. 2018 The essence of California’s pension crisis was on display last week when the California Public Employees Retirement System made a relatively small change in its amortization policy. San Francisco Chronicle, "California’s public pension crisis in a nutshell," 21 Feb. 2018 The project, which aims to have nearly 700 homes, was funded through a community mortgage program, with residents paying a monthly amortization of up to 2,000 Philippine pesos ($38). Rina Chandran, The Christian Science Monitor, "Slum dwellers in the Philippines build homes through community programs," 7 June 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'amortization.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of amortization

1851, in the meaning defined at sense 1

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Last Updated

13 Nov 2018

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The first known use of amortization was in 1851

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Financial Definition of amortization

What It Is

Amortization is an accounting term that refers to the process of allocating the cost of an intangible asset over a period of time. It also refers to the repayment of loan principal over time.

How It Works

Let's assume Company XYZ owns the patent on a piece of technology, and that patent lasts 15 years. If the company spent $15 million to develop the technology, then it would record $1 million each year for 15 years as amortization expense on its income statement.

Alternatively, let's assume Company XYZ has a $10 million loan outstanding. If Company XYZ repays $500,000 of that principal every year, we would say that $500,000 of the loan has amortized each year.

Why It Matters

The length of time over which various intangible assets are amortized vary widely, from a few years to as many as 40 years.  As a general rule, an asset should be amortized over its estimated useful life, or the maturity or loan period in the case of a bond or a loan.  If an intangible asset has an indefinite life, such as goodwill, it cannot be amortized.

It is important to note that the term amortization refers to intangible assets; the term depreciation refers to tangible assets, and the term depletion refers to natural resources.

Source: Investing Answers

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