Property, Plant, Equipment, Intangibles and Impairment
This topic covers acquisition cost, depreciation, depletion, amortization, capitalization, disposal gains and losses, intangible assets, goodwill, and impairment.
How to study for CPA FAR
Build every answer around recognition, measurement, presentation, disclosure, journal-entry logic, and careful calculation under the AICPA blueprint.
Core concepts
Concept 1
Property, Plant, Equipment, Intangibles and Impairment questions test whether a CPA candidate can recognize, measure, present, disclose, or analyze financial reporting information under the applicable framework.
Exam cue: Identify the entity type, reporting framework, account, transaction date, and financial statement affected.
Concept 2
The best FAR answer usually follows recognition criteria, measurement basis, classification, disclosure requirements, and clean journal-entry logic.
Exam cue: Determine whether the task is recognition, measurement, presentation, disclosure, analysis, or correction.
Concept 3
Eliminate answers that mix frameworks, skip accrual accounting, ignore dates, use the wrong basis, or calculate without first identifying the required financial statement assertion.
Exam cue: Check the journal entry, carrying amount, statement classification, and effect on income, equity, cash flows, or disclosures.
Risk pitfalls and guardrails
Calculating before deciding whether the item should be recognized, disclosed, reclassified, or excluded.
Guardrail: Use a 15-second safety pause before finalizing your action.
Using tax, cash, governmental, not-for-profit, or for-profit rules interchangeably.
Guardrail: Use a 15-second safety pause before finalizing your action.
Missing the date, fair value, impairment trigger, restriction, lease classification, or cash flow category that controls the answer.
Guardrail: Use a 15-second safety pause before finalizing your action.
Memory anchors
Capitalized Cost
Capitalized cost includes expenditures necessary to acquire an asset and prepare it for intended use.
Depreciation
Depreciation allocates the cost of a tangible asset over its useful life.
Amortization
Amortization allocates the cost of a finite-life intangible asset over its useful life.
Depletion
Depletion allocates the cost of natural resources as they are extracted.
Disposal Gain
A disposal gain occurs when proceeds exceed the carrying amount of the asset disposed.
Disposal Loss
A disposal loss occurs when proceeds are less than the carrying amount of the asset disposed.
Impairment
Impairment recognizes a decline when carrying amount is not recoverable or exceeds fair value under the relevant model.
Goodwill
Goodwill is recognized in a business combination and tested for impairment rather than amortized.
Research Expense
Research costs are generally expensed as incurred under U.S. GAAP.
Development Cost
Development cost treatment depends on the asset type and applicable guidance.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
Which cost is capitalized as part of land?
A machine costs $120,000, installation is $8,000, and testing materials net of proceeds cost $2,000. What amount is capitalized?
Answer all questions to submit.
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Move forward only after this module is stable.
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