RE:Acquisition Amortization GARP17 wrote: It seems the companies cash flow is great and is just being dragged down by amortization. Does anyone understand what is the amortization and when will it end?
The amortization is a non-cash charge that the company puts on its earnings to devalue the capitalized assets on the balance sheet.
Ie: You develop a new platform and capitalize $20M in development costs. The development costs won't show up on the earnings report, they will be capitalized on the balance sheet. When the platform is developed and ready to roll out, then that $20M will be amortized over a number of years, at which point a non-cash charge will show up on the earnings report. If the amortization period is 5 years, then $4M per year would be incurred as non-cash charges.