Considerations in selecting an amortization period:
Useful life: The amortization period should approximate the period from the time R&D money is spent to the time when most of the benefits are expected to have been realized.
Research has been done on several types of investments, how the market has responded, and amortization periods inferred from market data (Lev Sougiannis, 1996)
Minimum schedules: Each expense category with a separate amortization period will require a separate amortization schedule. In most cases, the estimation of useful life will have a margin of error of a couple of years. Thus, it would be easy to justify one amortization period for three expense categories with estimated useful lives of four, five, or six years, for example.The pattern of R&D charge over time and bottom line EVA over time can also be reviewed using analysis of different amortization periods to see if different periods make enough of a difference to be noticed by managers.
