Understanding Amortissement: The Process of Spreading Asset Costs Over Time

Amortissement is a French word that can be translated to "amortization" in English. It refers to the process of spreading out the cost of an asset over its useful life, in order to calculate the annual depreciation or devaluation of the asset.

In other words, amortissement is the method used to allocate the cost of an asset over a period of time, taking into account the expected useful life of the asset and the depreciation or devaluation that will occur each year. This allows for a more accurate representation of the asset's value on the balance sheet, and helps to reflect the declining value of the asset over time.

For example, if a company purchases a piece of equipment for $100,000 and expects it to have a useful life of 5 years, the annual amortissement would be $20,000 per year ($100,000 / 5 years). This means that the asset's value on the balance sheet would be reduced by $20,000 each year, reflecting the depreciation of the asset over time.