The purpose of depreciation is to spread out the tangible asset cost usually over a period of its useful life. Likewise, the costs of intangible assets such as copyrights, franchises, patents etc, have to be amortized to be similarly spread out. (See Amortization and Depreciation).In most cases, the licencing rights to a patent, franchises, copyright etc tend to be for a fixed period. The fixed period can be for 10, 15, 20 years or more.

The basic version of the StartBizUp app sets the period of amortization at 5 years or 60 months. However calculations will only be provided for the first 36 months of the 10-year amortization period. This is to simplify calculations and is sufficient to provide a fast assessment of the viability of the start up. Some users may find this fixed amortization period too rigid and not suitable for their use. There is therefore a way to work around this fixed amortization period. Suppose you signed a franchise that costs $480,000 that gives you the rights for 20 years. What you can do is to state that the Licences/Patents cost $240,000 for the period of 10 years.  (Note that you will be able to vary the amortization period in the advanced version of StartBizUp app.)


Work Out Costs

Amortization and Depreciation

Cost of Goods Sold

Machinery/Equipment and Furniture