I thought amortization refers to Intangible assets where as depreciation referes to tangible assets. I found following example in Scheweser. A company acquires other comapny. It records PP&E of book value of $20Milion to FMV of $25Million. Here is explanation. " The fair value of incrment of PP&E of $5Million should be amortized over its remaining useful life of 10 years. This results in amoritization of $500,000" Does amortization applies to tangible assets? Is this $500,000 amorization expense hits income statement? I am wondering how is this transaction affects balance sheet and income statment. Thanks
giribk Wrote: ------------------------------------------------------- > I thought amortization refers to Intangible assets > where as depreciation referes to tangible assets. > I found following example in Scheweser. > > A company acquires other comapny. It records PP&E > of book value of $20Milion to FMV of $25Million. > Here is explanation. > > " The fair value of incrment of PP&E of $5Million > should be amortized over its remaining useful life > of 10 years. This results in amoritization of > $500,000" > > Does amortization applies to tangible assets? Is > this $500,000 amorization expense hits income > statement? I am wondering how is this transaction > affects balance sheet and income statment. > > Thanks Yes, the amortization applies to tangible assets but it’s usually called depreciation and identified as such on a financial statement. generally you can consider amortization=depreciation in that they are both the gradual writing down of an asset’s value over time.