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Compare depreciation and amortisation.
The major differences between depreciation and amortization are as follows −
Depreciation
It determines asset useful life.
Charged on tangible assets.
Annual depreciation = (cost of tangible asset – salvage value)/useful life.
Have salvage value.
International accounting standard (IAS-16)/accounting standard (AS-6).
Residual value is considered.
Straight line method, reducing balance method, units of production method.
Amortisation
Determined on the basis of its legal or economic life.
Charged on intangible assets.
Annual amortisation = (cost of intangible asset)/useful life.
Don’t have salvage value.
International accounting standards (IAS-38)/accounting standard (AS-26).
Doesn’t considered residual value.
Straight line method.
Updated on: 24-Jul-2020
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