About Goodwill

Goodwill is an accounting concept meaning the value of an asset owned that is intangible but has a quantifiable 'prudent value' in a business for example a reputation the firm enjoyed with its clients. For example, a software company may have net assets (consisting primarily of miscellaneous equipment, and assuming no debt) valued at $1 million, but the company's overall value (including brand, customers, intellectual capital) is valued at $10 million. Anybody buying that company would book $10 million in total assets acquired, comprising $1 million physical assets, and $9 million in goodwill. In a private company, goodwill has no predetermined value prior to the acquisition; its magnitude depends on the two other variables by definition.

Contributions by Lamro, RayBirks, and Quarl.

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