FAR Intangible Assets
Learn the FAR Intangible Assets rule, work one CPA Exam example, avoid the common trap, and continue with free FAR questions.
The decision that earns the point
The FAR Intangible Assets decision
For FAR intangible assets, first separate purchased assets from internally generated costs, then determine whether the recognized asset has a finite or indefinite life. Finite-lived intangibles are amortized over the appropriate life and tested for impairment under the applicable model; indefinite-lived intangibles are not amortized but require impairment testing.
Exam use
FAR can test initial recognition, research and development, software or legal costs, amortization, impairment, and disclosure.
Your scratch-paper plan
Solve it in three moves
- 1
Identify the source
Determine whether the intangible was purchased separately, acquired in a business combination, or developed internally.
- 2
Classify the life
Use contractual, legal, renewal, obsolescence, and economic facts to decide finite versus indefinite life.
- 3
Apply subsequent accounting
Amortize finite-lived assets and use the correct impairment model without double-counting prior reductions.
Worked problem
Work the facts before choosing the answer
A company buys a patent for $120,000. The remaining legal life is 10 years, but expected economic benefit is six years and no residual value is stated.
Show the work
The finite useful life is six years because it is shorter than the remaining legal life under the assumed facts.
Answer
Straight-line amortization is $20,000 per year before any later impairment or change in estimate.
Do it now
Test the same decision with a fresh question
Start with free FAR practice. Create an account only when you want the 5-day no-card CPAPass trial and continued section practice.
The trap and the repair
Common trap
Using legal life automatically can overstate the useful life. Capitalizing every internally generated branding, research, or start-up cost also ignores the specific recognition rules.
Repair
Classify how the asset arose, determine the supported useful life, and apply only the subsequent model that matches that classification.
Your exam workflow
- Step 1Read the requirementIdentify what the task asks you to decide about far intangible assets.
- Step 2Sort the factsDetermine whether the intangible was purchased separately, acquired in a business combination, or developed internally.
- Step 3Apply the ruleUse contractual, legal, renewal, obsolescence, and economic facts to decide finite versus indefinite life.
- Step 4Check the outputAmortize finite-lived assets and use the correct impairment model without double-counting prior reductions.
Keep the next step narrow
Quick questions
What is the shortest useful answer for far intangible assets?
For FAR intangible assets, first separate purchased assets from internally generated costs, then determine whether the recognized asset has a finite or indefinite life. Finite-lived intangibles are amortized over the appropriate life and tested for impairment under the applicable model; indefinite-lived intangibles are not amortized but require impairment testing.
How can far intangible assets appear on the CPA Exam?
FAR can test initial recognition, research and development, software or legal costs, amortization, impairment, and disclosure. The exact task can change, so identify the governing facts before applying the rule.
What is the most common mistake with far intangible assets?
Using legal life automatically can overstate the useful life. Capitalizing every internally generated branding, research, or start-up cost also ignores the specific recognition rules. Classify how the asset arose, determine the supported useful life, and apply only the subsequent model that matches that classification.
Where should I practice far intangible assets?
Use /free-practice/far for section-aligned practice, then review /learn/concepts/net-fixed-assets when the miss comes from an adjacent rule rather than this topic itself.