# Amortisation

This article explains how **amortisation** works in Model Reef.

You will learn:

* What amortisation represents in the model.
* How it is generated from asset like variables.
* How it affects P\&L, Balance Sheet and Cashflow.

Amortisation is conceptually similar to depreciation but usually applies to intangible or deferred items.

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### What amortisation represents

In Model Reef, amortisation is typically used for:

* Intangible assets such as capitalised development costs or licences.
* Deferred costs that are expensed over time rather than immediately.

These items are usually represented using Asset type variables with appropriate categories, such as `Assets - Intangibles`.
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### Amortisation in the P\&L

In the P\&L:

* Amortisation is shown alongside depreciation below EBITDA and above EBIT.
* It reduces EBIT but not EBITDA.
* It is a non cash expense, just like depreciation.

Whether depreciation and amortisation appear as a single combined line or separate lines depends on your chosen reporting layout and categories.
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### Amortisation in the Balance Sheet

In the Balance Sheet:

* Intangible or deferred assets are recorded via Asset variables.
* Amortisation reduces the carrying amount of these assets over their useful life.
* Model Reef tracks the resulting net balance in the relevant asset categories.

The underlying logic is the same as depreciation, but the assets being amortised are usually not physical.
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### Amortisation in Cashflow and valuation

In the Cashflow Statement:

* Amortisation, like depreciation, does not appear as a cashflow.
* The initial cost appears as capex or an investing cash outflow when incurred.

In valuation:

* Amortisation is added back when computing free cashflow, because it is non cash.
* The impact of these assets on value is captured through their associated capex and any tax effects.

Amortisation therefore shapes reported earnings but not cash directly.
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***

## Related articles

* [Real Estate & Property](/use-cases/real-estate-and-property.md)
* [Build a Forward Valuation Using Ticker Fundamentals](/how-tos/valuation/build-a-forward-valuation-using-ticker-fundamentals.md)
* [Date Column Detection](/help/importing-and-data-inputs/date-column-detection.md)
* [Branch Selector](/syntax/understanding-the-interface/branch-selector.md)


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