Quick Definition

Goodwill is an intangible asset that arises when a company acquires another business for more than the fair value of its identifiable tangible and intangible assets.

Examples

• 1A tech company buys a smaller competitor for $1 million, but the tangible assets are only worth $700,000. The extra $300,000 paid is recorded as goodwill.
• 2A corporation acquires a brand with a strong customer base and market position, leading to a significant amount of goodwill on the balance sheet.
• 3When a company with a strong reputation and loyal customer following is acquired, the premium paid over the actual asset value is recognized as goodwill.

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