Final answer:
The process used to allocate the cost of intangible assets over their future service life is called amortization. It involves systematically allocating the cost of an intangible asset over its useful life to reflect the consumption of its economic benefits over time.
Step-by-step explanation:
The process used to allocate the cost of intangible assets over their future service life is called amortization. Amortization is the systematic allocation of the cost of an intangible asset over its useful life. This is done to reflect the consumption of the asset's economic benefits over time. The allocated cost is recorded as an expense on the income statement.
For example, let's say a company buys a patent for $100,000 with a useful life of 10 years. The company would amortize the cost of the patent by $10,000 each year for 10 years. This allows the company to recognize the expense over the asset's useful life.
Other intangible assets that can be subject to amortization include trademarks, copyrights, and franchises.