Amortisation
The write-off of intangible fixed assets (such as goodwill or development costs) over their useful life.
What does amortisation mean?
The write-off of intangible fixed assets (such as goodwill or development costs) over their useful life.
In Dutch annual accounts, amortisation usually means the systematic write-off of an intangible asset. For loans the same word sometimes has a different meaning, namely repayment. Always read the context of the line item.
How does it work?
Amortisation is the write-off of intangible fixed assets: software, licences, patents, purchased goodwill and capitalised development costs (art. 2:365(1) DCC). Article 2:386(3) DCC sets the terms. Costs of incorporation and of issuing shares are written off over at most five years. Goodwill and development costs follow the expected useful life; only if that cannot be estimated reliably does a maximum of ten years apply, and for goodwill you then explain the period chosen.
The residual value of an intangible asset is nil, unless a third party has already committed to acquire it or an active market exists (RJ 210). Amortisation starts as soon as the asset is ready for use: software that goes live in October is written off from October, even if the build began in March. For capitalised development costs the entity maintains a statutory reserve equal to the capitalised amount (art. 2:365(2) DCC).
Example
A BV (private limited company) buys a bespoke customer portal on 1 April 2025 for € 36.000 and expects to use it for four years; residual value nil. Amortisation per year: 36.000 / 4 = € 9.000. In 2025 nine months count: 9/12 × 9.000 = € 6.750. Journal entry: amortisation of intangible fixed assets € 6.750 debit, accumulated amortisation of software € 6.750 credit. Carrying amount at the end of 2025: € 29.250. For tax purposes the annual write-off is at most 20% of € 36.000, for nine months € 5.400.
In the annual accounts
Costs in the P&L and a decrease in intangible fixed assets on the balance sheet.
Difference from repayment
In English, amortization also means repaying a loan in instalments; a bank speaks of an amortisation schedule. That is a cash flow that reduces the debt and does not pass through the profit and loss account. Amortisation in the annual accounts is the opposite: an expense without cash flow, which reduces the carrying amount of an intangible asset.
Common mistakes
- Confusing repayment with the write-off of costs
- Choosing an unlimited useful life without justification
What to look out for
- Capitalise only what was bought from a third party or what meets the conditions for development costs. Research costs and self-built brands do not go on the balance sheet and so are not amortised either (RJ 210).
- A write-down of goodwill is never reversed, even if the acquired activity recovers (art. 2:387(5) DCC).
- For tax purposes the write-off of goodwill is at most 10% per year (art. 3.30(2) Dutch Income Tax Act 2001). A micro or small entity that chooses tax-based accounting policies also shows that amount in the annual accounts (art. 2:396(6) DCC).
Legal basis and source
art. 2:386 DCC
Frequently asked questions
Is goodwill always amortised over ten years?
No. The main rule is the expected useful life. The term of at most ten years applies only in the exceptional case where the useful life cannot be estimated reliably (art. 2:386(3) DCC).
Is amortisation included in EBITDA?
No. The A in EBITDA stands for amortization. Amortisation is added back to operating result, just like depreciation of tangible fixed assets, to arrive at EBITDA.
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