Amortization

ccounting procedures that gradually reduce the value of costs and an asset with a limited useful life or other intangible assets through periodic loading to income; amortization can also mean a reduction in debt with regular payments of principal and interest by a certain amount so that the loan is paid when it is due (amortization; amorticement).

Financial Fervices Authority

Difference between Amortization and Depression and Depletion

Although both have the meaning of depreciation of an object, amortization is different from depression and depletion. If depression is the cost of depreciation of fixed assets over benefits such as vehicles, depletion is the cost of depreciation in the mining sector. Amortization is a procedure whereby the depreciation of an intangible asset is reduced in each accounting period. Companies do write off for intangible assets through amortization such as Goodwill. An example is when a company has a loan of Rp10,000,000 and is annually paid in the amount of Rp500,000 for 20 years, the company is amortizing until the loan is lost.

When to start amortization

Amortization of intangible assets starts in the month of expenditure, except for certain business fields stipulated in the Minister of Finance Regulation Number PMK 248 / PMK.03 / 2008, namely:

  1. Forestry business sector, namely forestry business, forest area and forest products whose plants can produce many times and only produce after being planted for more than 1 (one) year.
  2. The plantation business sector, namely the plantation business sector whose plants can produce many times and only produce after being planted for more than 1 (one) year.
  3. Livestock business sector, which is a livestock business sector where livestock can produce many times and can only be sold after being kept for at least 1 (one) year.

Amortization of expenses to obtain intangible assets and other expenses for certain business fields starts on the back of commercial production (the month in which the sale begins).

Fiscal Amortization Method

Calculation of fiscal amortization is regulated in article 11 A paragraph of Law Number 36 Year 2008 Concerning Income Taxes, the permissible amortization method is:

  1. Straight-line methodstraight-line method ), which is a method used to calculate the amortization of intangible assets carried out on equal portions by applying the amortization rate for expenditures for a predetermined useful life.
  2. The declining-balance method, the method used to calculate amortization in declining portions by applying amortization rates to the book value and the book value at the end of the useful life must be amortized at the same time.

Use of the amortization method is carried out in accordance with the principles and consistently. Expenditures made before a commercially operating company that has a useful life of more than one year can be capitalized and then amortized using the above method.

 

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