How to calculate amortization expense?
Since finite life intangible assets are capitalized onto the balance sheet at the acquisition/purchase price, that amount represents the capitalized cost base to amortize. Assuming the straight-line method is used, the company divides the capitalized cost by the estimated useful life, and that gives you the amortization expense per year to recognize in the financial statements.
Similar to depreciation, amortization is a non-cash expense, so there is no cash flow impact. Amortization is added back to calculated reported EBITDA.
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