Primary navigation:

QFINANCE Quick Links
QFINANCE Reference
Add the QFINANCE search widget to your website

Home > QFINANCE Dictionary > Definition of goodwill

Definition of



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.


goodwill - Related Articles
  • Goodwill and Patents


    One could define both goodwill and patents as figments of the imagination, the former a financier’s and the latter an inventor’s. The accounting realm assigns real value to both, based on the theory that both will deliver real benefits in the future.

  • The Value and Management of Intellectual Property, Intangible Assets, and Goodwill

    Best Practice

    Purchase accounting must be applied to all acquisitions (business combinations are also treated as acquisitions, and there is no more merger accounting). Many intangible assets that would previously have been subsumed within goodwill must be separately identified and valued. Explicit guidance
    By Kelvin King

  • Accounting for Business Combinations in Accordance with International Financial Reporting Standards (IFRS) Requirements

    Best Practice

    accounting.” Instead, all business combinations must be accounted for using the acquisition accounting method. This requires that both acquirer and acquiree are identified for each transaction, that a fair value exercise is performed on the acquiree’s assets and liabilities, and that purchased goodwill
    By Shân Kennedy

  • Shân Kennedy


    Shân Kennedy is an independent consultant who advises on IFRS and valuation issues. Her background includes more than 20 years with Ernst & Young and Deloitte. She has also spent four years working at the UK Accounting Standards Board developing UK GAAP guidance on accounting for goodwill


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.

Back to top