Amortization explained

[@TheFinanceStoryteller]

Enjoyed this video? Then subscribe to the channel right now, and let's walk through some examples of intangible assets: kzbin.info/www/bejne/Y4Xdknpji6llfbc

[@TheFinanceStoryteller]

@Samrat R.m Depreciation is for tangible assets, amortization for intangible assets.

[@chris_tina2007]

One goes up and ones goes down

[@brianivandertp]

The best explanation on the internet

[@TheFinanceStoryteller]

Thank you! Happy to hear that.

[@devyn1231]

Thank you, I was stuck here while analyzing balance sheets! Great explanation

[@TheFinanceStoryteller]

Hello Devyn! Welcome to the channel. I have more tutorials covering various aspects of the balance sheet: kzbin.info/www/bejne/r5Kao4WQf6h_e8U Enjoy, and let me know what you think! Also, the EBIT-EBITA-EBITDA video might be an eye-opener: kzbin.info/www/bejne/pHrQoWhnr76Wr5Y

[@ZanithanGaming]

The minute you mentioned sister of depreciation and it is the depreciation of intangible assets. My brain went BOOM

[@TheFinanceStoryteller]

Hello Zanithan! I hope that was a BOOM as in "now I get it", instead of "BOOM, out goes the light". ;-)

[@ZanithanGaming]

@@TheFinanceStoryteller 😅😅😅 i get it now. Thank you for your videos sir

[@TheFinanceStoryteller]

Happy to help! Enjoy the whole collection of videos on the channel, and please spread the word!

[@rishikesh3590]

Exactly that was the moment just the difference is tangible assets and intangible assets

[@acemagnano]

Such a great video, thank you so much! Your explanation was simple and straightforward, and I appreciate that you also included a section for the actual booking of amortization

[@TheFinanceStoryteller]

Glad you enjoyed it, Vanessa! Happy to help. 😎

[@bailarafiq3002]

hey, please explain amortized cost in the perspective of financial instruments. Your work is admirable.

[@TheFinanceStoryteller]

Thanks for the kind words, Baila. Amortized cost in the perspective of financial instruments is not an area I am personally familiar with, so I am sorry that I cannot answer your question.

[@reporttv1986]

Thank you very much for this information.

[@TheFinanceStoryteller]

You're welcome, Mani! Happy to help. Please be aware that there are multiple uses of the word amortization. I use it in this video in relation to amortization of intangible assets, others might talk about loan amortization which is a completely different thing.

[@reena1073]

why do we need to amortize or depreciate? and when do we amortize and depreciate? Thank you! your answer will be so much appreciated:)

[@TheFinanceStoryteller]

Check the definitions at timestamp kzbin.info/www/bejne/mZqaY5SViN95mbM and you will know the answer!

[@nab-rk4ob]

Ty 👏👏👏👏👏👏👏👏I get it now.

[@TheFinanceStoryteller]

You're welcome! Nice to hear that.

[@mjaiprashanth2234]

Very Useful

[@TheFinanceStoryteller]

Thank you for the kind words!

[@fabuloustrader5652]

well explained..

[@TheFinanceStoryteller]

Thank you!

[@dustiinde4216]

I am a passionate follower of you channel and I am taking Fnance cource at uni and I study here with you. What I want to ask is that when making an investment decision amortization time is considered. I dont quite understand. thanks

[@TheFinanceStoryteller]

The type of amortization I cover in this video is related to intangible assets on the balance sheet. What I think you are referring to is a loan amortization schedule, which is a very different topic (and I am not the one that can give you a really good explanation of it).

[@FaridaSultanaIchoosesuccess]

@@TheFinanceStoryteller Don't you have videos that explain loan amortization schedule ???

[@TheFinanceStoryteller]

Hello Farida! No, sorry, I don't.

[@kylahflores9848]

How is an amortization relevant to the accountant

[@TheFinanceStoryteller]

It can have a huge impact on profitability (net income), but not on cash flow (CFOA).

[@slavicnation5523]

How is this related to bonds issued at a discount or premium

[@TheFinanceStoryteller]

It isn't. At least not in this video. I am discussing amortization here in the sense of taking a part of the intangible assets off the balance sheet into the P&L as expense.

[@slavicnation5523]

@@TheFinanceStoryteller I see, thanks for the reply, do you know how amortization of bonds work or have a video explaining it?

[@TheFinanceStoryteller]

Nope, that's not my area of expertise.

[@matthewtschetter1953]

@@slavicnation5523 I think you are talking about more in Accounting terms with buying bonds on Premium/Discount and their amortization rate. Here is a good video that I think should be able to help you understand what you are talking about. kzbin.info/www/bejne/mZTMq5d8rbqIj7c

[@marinaamin8132]

But why does the amortization reduce the profit?

[@TheFinanceStoryteller]

Hi Marina! Amortization is an expense line in the income statement. The higher expenses are, the lower the profit. See also my video on EBIT-EBITA-EBITDA kzbin.info/www/bejne/pHrQoWhnr76Wr5Y

[@stepmeister8891]

`what is amortixation deposit?

[@TheFinanceStoryteller]

I don't know what that means, but it probably has to do with the other use of the word amortization in the context of loan payments. In the video I made on amortization, I talk about amortization of intangible assets in accounting, which is something completely different.

[@rads_9]

in the last part of the video, the weighted average amortization period is 3.4 years. I don't understand the breakdown you used to explain that because in the breakdown, there are more than 3.4 years accounted for the amortization, exceeding the weighted average amortization period

[@TheFinanceStoryteller]

Hello Radhy! I didn't calculate the 3.4 years myself, it comes straight out of the annual report of Apple. If you want to replicate it, you would need to know the date on which each intangible asset was added to the balance sheet, the amortization period for each of them, and then calculate the total amortization per year.

[@rads_9]

@@TheFinanceStoryteller thank you for your explanation

[@loganyang619]

You should come to Australia as an accounting lecturer😃

[@TheFinanceStoryteller]

That's a long way from home, as I live in The Netherlands. I did enjoy a holiday trip to Australia many years ago, very good memories! Thanks Bruce! 😉

[@loganyang619]

@@TheFinanceStoryteller There are many Dutch Australians in my city, my manager as well, her last name is Vandersaag, is it Dutch last name?

[@TheFinanceStoryteller]

Yes, that sounds very Dutch! It is highly likely that her ancestors may have been in the woodcutting business, running a mill (powered by wind or water) that would drive a mechanized form of woodcutting. The "saag" in the name is probably derived from the verb "zagen" (sawing).

[@sudebbhattacharjee968]

Is Preliminary expenses are amortized?

[@TheFinanceStoryteller]

Yes, you could call the spreading of prepaid expenses over the months to which they apply either "amortization" or "allocation". kzbin.info/www/bejne/nobdZGyKbZKJZ6s

[@mememajor2346]

Learning in 2024

[@tumieneverson]

YOUR VOICE...

[@TheFinanceStoryteller]

Thank you! Hope you like the content too.