Patent Amortization

Patent amortization refers to the accounting process by which the acquisition cost of a patent is spread over its useful life. A patent is an exclusive right granted to an inventor for a specific invention, and its term of protection is limited, generally to 20 years.

Patent amortization therefore consists of recording the initial cost of the patent as an expense in the company's financial statements over a period of several years. This practice reflects the gradual use of the patent and the depletion of its economic value over time.

In practice, amortization of the patent reduces the company's taxable profits and ensures a better match between the costs incurred for the patent and the income it generates.