Amortisation

Depreciation for assets you cannot touch. An intangible with a finite life is written off across that life on the same logic that a machine is.

The pharmaceutical company's ₹480 crore of capitalised development, amortised over eight years, will have taken ₹180 crore of charges after three years, leaving ₹300 crore on the balance sheet.

Amortisation needs its own word because of what happens in a valuation. Amortisation of an acquired customer list is a real cost of the acquisition already paid in cash, and adding it back to reach a cash earnings figure is defensible. Amortisation of capitalised development that will have to be spent again next year to keep the product alive isn't something to add back at all, because the spending recurs.

Ask yourself whether the underlying spending repeats. The answer tells you whether the charge is real.