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Finance Dictionary and Glossary of Investment Terms
An intangible asset which provides a competitive advantage, such as a strong brand, reputation, or high employee morale. In an acquisition, goodwill appears on the balance sheet of the acquirer in the amount by which the purchase price exceeds the net tangible assets of the acquired company.
The excess of the purchase price over the fair market value of an asset. Accountants record this as a 'write off' in the financial report.
This typically is the result of a buyout of a company that does not have many assets. For example, suppose a company has a book value (assets minus liabilities) of $10 million, but is purchased for $100 million. The difference between the two -- $90 million -- is considered goodwill. This amount must be charged against earnings for five to 40 years, and can be a drag on future earnings.
Excess of purchase price over fair market value of net assets acquired under the purchase method of accounting.
The going-concern value of a company in excess of its asset value; goodwill is considered an intangible asset. Generally, it is the value of the business' good name, its customer relations, high employee morale, and other factors that might translate into earning power. Nasdaq's calculation of net tangible asset value excludes goodwill. (See going-concern value)