Amortization Expense is an accounting term that describes the gradual reduction of the value of a loan or intangible asset over time. It is often referred to as amortization because the process involves “eating away” at the balance over time with regular payments. When an organization has a loan or intangible asset on its balance sheet, it must use amortization expense to spread out the cost of the loan/asset over its useful life. This makes the cost of ownership easier to manage as it reduces the burden of paying for the entire cost upfront.