The board of directors of Mauger Real Estate Ltd. is reviewing the 2014 annual report. A new board member, a dermatologist with little business experience, questions the company accountant about the amortization amounts. The dermatologist wonders why amortization expense has decreased from $250,000 in 2012, to $230,000 in 2013, and to $215,000 in 2014. He states that he could understand the decreasing annual amounts if the company had been disposing of properties each year, but that has not occurred. Further, he notes that growth in the city is increasing the values of company properties. Why is the company recording amortization when the property values are increasing?
Required
Write a short response to explain the concept of amortization to the dermatologist and to answer his questions.