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Goodwill: Definition and Meaning
Definition
Goodwill is an intangible asset that may arise when one company acquires another for more than the fair value of its identifiable net assets.
Why It Matters
Goodwill may reflect expected synergies, assembled workforce, reputation, market presence, customer relationships, or other factors that are not separately identified as assets in acquisition accounting. It is relevant in mergers, acquisitions, business sales, and financial-statement reporting.
The accounting treatment of goodwill, including impairment considerations, depends on the applicable accounting framework.
Example
A buyer pays more for a company than the fair value of its identifiable assets minus liabilities. The excess may be recorded as goodwill.
Related Terms
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