Non-amortizable

Non-amortizable describes an asset or cost that does not decrease in value or expense over a set period through a systematic method like amortization. Unlike amortizable items, which spread the cost over time, non-amortizable items are expensed immediately or may retain their value indefinitely. This term is frequently used in accounting to classify certain types of assets and expenses, specifically focusing on those that are not subject to depreciation or gradual write-off over their useful life, such as certain intangible assets like goodwill in a business acquisition.

Non-amortizable meaning with examples

• The company’s goodwill, resulting from the acquisition, was considered non-amortizable under current accounting standards, meaning its value wouldn't be reduced over time through amortization. Instead, it's subject to annual impairment reviews to determine if its value has decreased. This treatment significantly impacts the company's financial statements, particularly its net income.
• The initial investment in land is generally a non-amortizable asset. Its value doesn't depreciate and it has an infinite useful life. This differs from a building on the land, which is amortizable. Its cost gets allocated across its useful life, affecting the company's depreciation expense and net income. This asset type provides long-term financial security
• When a company incurs a significant expense on research and development, it may consider if its value is non-amortizable or not. If the research does not produce any intellectual property, the costs are considered non-amortizable expenses, and must be expensed in the current reporting period. If the development does produce intellectual property, the costs are considered non-amortizable asset and expensed upon use.
• During an audit, it was highlighted that certain marketing expenses, designed to increase the brand's value, should be treated as non-amortizable. These were treated this way due to their continued impact and indefinite useful life to the company. These kinds of decisions directly impact the reported profit margins, and the company's asset values.
• If a company pays a large sum for a trade secret, the trade secret might be treated as a non-amortizable asset. Although the asset holds value, its cost isn't amortized over its life. Instead, the company tests to see if the asset's value has been impaired. This treatment impacts both the balance sheet and the income statement.