[_heimdall]

Amortization is basically just a way of splitting the cost of something out over multiple years to change how much you may owe in taxes.

In this case, previously software engineers' salaries were considered an operating expense like any other salary, and the full amount of that was used to decrease how much profit you have to pay taxes on. Now you can only write off a portion of the salary, having to split it over multiple years' taxes instead.

This is really common with R&D expenses, physical equipment, etc. The big change was that software engineers are now considered an R&D expense rather than someone working to assemble a final product, for example.

[CoastalCoder]

> Amortization is basically just a way of splitting the cost of something out over multiple years to change how much you may owe in taxes.

Are there any non-tax reasons that companies, accountants, lenders, etc. would use the concept of amortization?

I.e., is there some kind non-tax-related of financial planning that finds the concept of amortization useful for decision-making?

[ozymandias8]

Some business that have spending limits like professional football clubs use amortization to make their spending look lower than it is.

They can amortize the cost of new players over the length of that player's contract while accounting player sales as instant profits.

[_heimdall]

As far as I'm aware amortization is only used for tax purposes. I guess you could use the adjusted profits and losses if you had a reason to show lower profits, but as far as financial planning goes the money has already been spent so its largely a game of when you want the expense to show up on your tax bill.