Cross Asset · Equity · Core
Amortization
Amortization is the write-down of an intangible (or the scheduled paydown of a loan) — two different words sharing a calendar.
Definition
In accounting, finite-lived intangibles (customer lists, patents) are amortized. In credit, an amortizing loan pays principal on a schedule. Do not mix them. US GAAP goodwill is impaired, not amortized.
Why it matters
Add-backs of amortization can be fair (non-cash, non-replaceable) or lazy (the customer list must be re-bought with sales spend).
Case
A roll-up adds back all PPA amortization to ‘cash EPS.’ Sales and marketing then quietly replace the acquired relationships. The add-back was a re-label of opex.
How to read it
Ask whether the intangible must be refreshed with cash. Loan amortization is a cash fact; intangible amortization is a schedule.
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