KudoZ home » Spanish to English » Accounting

amortización

English translation: Amortization

Login or register (free and only takes a few minutes) to participate in this question.

You will also have access to many other tools and opportunities designed for those who have language-related jobs
(or are passionate about them). Participation is free and the site has a strict confidentiality policy.

GLOSSARY ENTRY (DERIVED FROM QUESTION BELOW)

Spanish term or phrase:	amortización
English translation:	Amortization
Entered by:	Alan Schwartzseid

Options:
- Contribute to this entry
- Include in personal glossary

01:11 Dec 8, 2003

Spanish to English translations [PRO]
Bus/Financial - Accounting / accounting

Spanish term or phrase: amortización

CONTEXT: El inmovilizado inmaterial recoge aplicaciones informáticas y licencias de uso compradas en diciembre. Su amortización se realiza linealmente durante un periodo de 4 años.

It's part of a "Memoria de Cuentas Anuales Abreviadas"

rgguitian

Amortization

Explanation:
There are two terms that mean essentially the same thing but for different types of depreciation. This one is used mostly for monetary issues such as mortgages, as opposed to specifically depreciation which is used for material possessions such as buildings, trucks, etc.

Selected response from:

Alan Schwartzseid

Grading comment

Muchas gracias Alan !
4 KudoZ points were awarded for this answer

Summary of answers provided

5 +6

Amortization

Alan Schwartzseid

Amortization (of intangible assets or goodwill)

Richard Cadena

depreciation

Michael Powers (PhD)

5 -1

wright off

kairosz (Mary Guerrero)

1 +2

Just for info

Andy Watkinson

Answers

1 min confidence:

amortización depreciation

Explanation:
4-year linear depreciation

context and Urrutia, Diccionario de negocios

Mike :)

--------------------------------------------------
Note added at 2 mins (2003-12-08 01:14:02 GMT)
--------------------------------------------------

In other contexts \"amortization\" but here, 4-year linear depreciation for accounting purposes

Michael Powers (PhD)
United States
Local time: 03:35
Works in field
Native speaker of:

English
PRO pts in category: 202

16 mins confidence:

peer agreement (net): -1

wright off

Explanation:
Es otra opción

kairosz (Mary Guerrero)
Mexico
Local time: 02:35
Works in field
Native speaker of:

Spanish

44 mins confidence:

peer agreement (net): +6

Amortization

Alan Schwartzseid
Native speaker of:

English
PRO pts in category: 4

Grading comment

Muchas gracias Alan !

1 hr confidence:

peer agreement (net): +2

amortización Just for info

Explanation:
4. How does amortization differ from depreciation?

A. This is a great question, especially in this era of so many knowledge companies. It also involves a detailed answer that must be broken down into three components.
B. For my first component, I can give a simple answer to your question, because there are many similarities between depreciation and amortization. So let's first review how depreciation works. When a company buys a tangible asset, such as an expensive machine that it does not intend to sell and expects to generate value over a long life, accounting rules do not allow the company to expense the total machine cost in the year the machine is acquired.
C. This is because that an accrual-accounting income statement is predicated on telling how well a company was making money on the products and services it sold during the period under review. So, to this end, a portion of the total cost of the machine needs to be expensed to each period over the expected useful life of the machine. Often the spread involves an equal amount for each period, which is called straight-line depreciation. So that's how a tangible asset gets depreciated.
D. Amortization is similar to depreciation, except that it deals with intangibles, such as all costs paid to outsiders to acquire a patent, a portion of which needs to be expensed to each period over the legal life of the patent. If the total cost of the machine or the patent were expensed all to the year of acquisition, year 1 profit would be understated and profit for subsequent years (when the asset was creating value) would be overstated. There are many other examples of intangible amortization, such as long-term debt reduction, leasehold improvement, and goodwill, each of which also has its own nuances.
E. The hot topic this year is goodwill amortization, which brings in my second component, that of defining goodwill. Goodwill is an asset that occurs on the books of a company that acquires another company. Now, the acquiring company first lists on its balance sheet all the other assets acquired, such as cash, receivables, inventory, and fixed assets, all at the estimated fair value of each line item, in as-is condition, on the date of acquisition. But usually the acquisition price exceeds the value of all these standard types of assets; the resulting dollar difference is called goodwill.
F. By booking the difference as goodwill, the balance sheet will now balance and, as you know, this is a good thing. But goodwill also shows the value that the acquiring company has agreed to pay for all the other intangible assets that are difficult to quantify, such as customer lists, employee morale, uniquely successful culture components, intellectual property, and research and development. In this knowledge economy, goodwill has become a much more significant part of many balance sheets; sometimes it is the biggest asset on the balance sheet. But remember that goodwill does not show up on a balance sheet unless there has been an acquisition.
G. My third component deals with amortizing this intangible over its estimated useful life, which we covered earlier. But goodwill amortization is no longer easy because the rules I shared with you earlier are no longer valid. Beginning in 2002, goodwill is no longer to be written off over its useful life (amortized). Instead, goodwill dollars are now supposed to remain unchanged on the acquiring company's balance sheet forever.
H. (Incidentally, if you are wondering why the old rules for goodwill amortization sufficed for many years, only to suddenly change, you may be relieved to know that I have the same concern and no truly valid answer; accounting in the USA obviously has some major weaknesses, as you can see here. However, I also believe that the information in my first and second components incorporates some of the many strengths of accounting in the USA.)
I. Interestingly, there is now one exception to leaving goodwill on the balance sheet forever. Whenever a company can no longer justify that the goodwill value showing on the balance sheet is still true, the company must write down the goodwill value to the lower estimated actual current value, even if this means writing it down to zero. But this actual current value is not always readily determinable, so company judgment is required. Of course, this judgment can lead to creative accounting. And the dollars involved are usually major.
J. Furthermore, it is now difficult to do trend analysis on net income, because, prior to 2002, goodwill amortization always reduced net income. So, without taking hard-to-find footnotes into account, a trend analysis using net income in an annual report will no longer compare apples to apples. A suggested solution to this dilemma is to use an outside resource such as Value Line, which readily provides the necessary information needed to compare apples to apples in a trend analysis.
K. Now I hope we answered your question about the difference between depreciation and amortization. I apologize that I could not give a simpler answer. However, this lengthy answer seems also to be a commentary on how accounting just "ain't" simple anymore, like it supposedly used to be. Bummer.

--------------------------------------------------
Note added at 1 hr 36 mins (2003-12-08 02:48:22 GMT)
--------------------------------------------------

D. Amortization is similar to depreciation, except that it deals with intangibles

Andy Watkinson
Spain
Local time: 09:35
Works in field
Native speaker of:

English
PRO pts in category: 8

3 hrs confidence:

Amortization (of intangible assets or goodwill)

Explanation:
Goodwill or intangible assets are amortized, whereas fixed assets such as property, plant, and equipment are subject to depreciation. Hope this helps.
Reference: Accounting Trends & Techniques published annually by the AICPA

Richard Cadena
Mexico
Local time: 02:35
Specializes in field
Native speaker of:

English
PRO pts in category: 555

Return to KudoZ list

KudoZ™ translation help
The KudoZ network provides a framework for translators and others to assist each other with translations or explanations of terms and short phrases.

Overview

Latest translation questions

Ask a translation question

See also:

ProZ.com term search

Search millions of term translations

amortización

English translation: Amortization

Login or register (free and only takes a few minutes) to participate in this question.

Answers

Sign in to your ProZ.com account...

Or create a new account

ProZ.com ideas

KudoZ™ translation help
The KudoZ network provides a framework for translators and others to assist each other with translations or explanations of terms and short phrases.

amortización

English translation: Amortization

Login or register (free and only takes a few minutes) to participate in this question.

Answers

Sign in to your ProZ.com account...

Or create a new account

ProZ.com ideas

KudoZ™ translation helpThe KudoZ network provides a framework for translators and others to assist each other with translations or explanations of terms and short phrases.

KudoZ™ translation help
The KudoZ network provides a framework for translators and others to assist each other with translations or explanations of terms and short phrases.