Goodwill

Abstract

Businessmen and economists use the word ‘goodwill’ to describe the intangible and unquantifiable aspects of a company which give it an earning power, and therefore a value, beyond that of its mere assets: things such as the quality of service, reliability, style, innovative flair, and imagination. Accountants, however, allow goodwill only when one company acquires another, and then only as an arithmetic differential; in effect, they define it as any amount paid by the acquirer above the book (i.e. accountant’s definition of) value of the acquired company, regardless of the reason why a buyer was prepared to pay that additional amount.