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Goodwill

Definition - What does Goodwill mean?

The term goodwill refers to the reputation of a business that it has earned through its practices over time. For accounting purposes, the goodwill is treated as an asset. However, it is an intangible one that you can’t touch or see it. For acquisitions, goodwill is the amount paid above the cost of all the assets of the business.

Justipedia explains Goodwill

Valuation of goodwill is usually subjective. Goodwill is not recorded in the books of accounts and is only calculated at the time of acquisition. There are mainly two methods to calculate goodwill – Excessive Profit Approach & Residuum Approach.

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