How to calculate the total amortization of intangible assets

Answer: 1. Straight-line method

The straight-line method, also known as the average life method, is the amortization of intangible assets. A method in which the sales amount is evenly distributed in each accounting period. The calculation formula is as follows:

Annual amortization of intangible assets = total acquisition amount of intangible assets/useful life

This kind of The advantage of the method is that it is simple to calculate and easy to master. The disadvantage is that it is not ideal in terms of meeting the requirements of the accounting objectivity principle and the matching principle. It is suitable for intangible assets with strong stability, such as trademark rights, copyrights, land use rights, etc. Use this amortization method.

2. Production method

The production method refers to a method that calculates the amortization amount based on the production volume provided by the intangible asset during the entire period of use. This method is based on the premise that the value of the intangible assets consumed per unit of output is equal. The calculation formula is as follows:

Amortization per unit of output =

Amortization of intangible assets per period Sales = Amortization per unit of output Use this amortization method.

3. Accelerated amortization method

The accelerated amortization method is compared to the uniform straight-line amortization method in which the annual amortization amount is equal. An amortization method in which intangible assets are over-accounted for amortization in the early period of use and under-accounted for in the later period, and the amortization amount decreases year by year. The purpose of adopting the accelerated amortization method is to accelerate the compensation of the cost of intangible assets within the estimated useful life. Accelerated amortization methods include the declining balance method and the sum-of-the-years’ digits method.

1. Declining balance method

The declining balance method is based on the premise that the estimated residual value of intangible assets is not considered in the early stage. A method to calculate the amortization of intangible assets by taking the cost of intangible assets at the beginning of each period minus accumulated amortization and a multiple of the straight-line amortization rate. The following uses the double-declining balance method as an example to illustrate the calculation formula. As follows:

Annual amortization = net book value of intangible assets at the beginning of the year × annual amortization rate

Among them, net book value of intangible assets = cost of intangible assets - accumulated amortization. In double Under the declining balance method, the net book value of an intangible asset in the later period may be lower than its residual value. Therefore, within two years before the amortization period expires, the cost of the intangible asset minus the accumulated amortization and the estimated residual value should be deducted. The balance is amortized evenly.

2. Sum of years’ digits method

The sum of years’ digits method is to multiply the cost of intangible assets minus the estimated residual value by the amortization rate that decreases year by year. A method of calculating annual amortization. The numerator of the amortization rate represents the number of years that the intangible asset can still be used, and the denominator represents the sum of the years of use. The calculation formula is as follows:

Annual amortization rate = The number of years that the intangible asset can still be used/the number of years of use of the intangible asset and ×100%

or expressed as:

Annual amortization rate = ×100%

Years Amortization amount = (cost of intangible assets - estimated residual value) × annual amortization rate

For intellectual property intangible assets that are closely related to knowledge, technology, and product updates, such as patents and non-patented technologies , adopting the accelerated amortization method has more advantages than using the straight-line amortization method. The specific manifestations are as follows: first, the accelerated amortization method is more in line with the matching principle. In the early stage of use of this type of intangible assets, due to its obvious monopoly and exclusive position, It can bring higher profits to enterprises. However, with the continuous emergence of new technologies and the improvement of simulation and imitation technology levels, the monopoly position will gradually be lost, and the benefits brought will also decrease year by year. According to the matching principle, for this It is appropriate to adopt the accelerated amortization method for quasi-intangible assets. Secondly, the accelerated amortization method is more consistent with the principle of conservatism. Using the accelerated amortization method will make the intangible assets more amortized in the early stage and less amortized in the later period. If the intangible assets are eliminated early , the cost of the remaining intangible assets is also less, so the risk is smaller.

What does intangible assets mean?

Intangible assets (Intangible Assets) refer to those that have no physical form owned or controlled by the enterprise. Identifiable non-monetary assets. Intangible assets can be divided into broad and narrow senses. Intangible assets in a broad sense include monetary funds, financial assets, long-term equity investments, patent rights, trademark rights, etc., because they do not have physical entities, but appear as certain A legal right or technology. However, in accounting, intangible assets are usually understood in a narrow sense, that is, patent rights, trademark rights, etc. are called

Intangible assets.