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Home > QFINANCE Dictionary > Definition of goodwill

Definition of

goodwill

Accounting

business assets such as reputation and expertise an intangible asset of a company which includes factors such as reputation, contacts, and expertise, for which a buyer of the company may have to pay a premium.

Goodwill becomes an intangible asset when a company has been acquired by another. It then appears on a balance sheet in the amount by which the price paid by the acquiring company exceeds the net tangible assets of the acquired company. In other words

Purchase price – Net assets = Goodwill

If an airline is bought for $12 billion and its net assets are valued at $9 billion, $3 billion of the purchase would be allocated to goodwill on the balance sheet.

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Definitions of ’goodwill’ and meaning of ’goodwill’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’goodwill’ and other financial terms with our online QFINANCE Financial Dictionary.

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