Goodwill

Goodwill in financial matters is the value of an entity over and above the value of its assets. The term was originally used in accounting to express the intangible but quantifiable "prudent value" of an ongoing business beyond its assets, resulting perhaps from the reputation the firm enjoyed with its clients.

Goodwill in financial statements arises when a company is purchased for more than the fair value of the identifiable assets of the company. The difference between the purchase price and the sum of the fair value of the net assets is by definition the value of the "goodwill" of the purchased company.

There is a distinction between two types of goodwill depending upon the type of business enterprise: institutional goodwill and professional practice goodwill. Furthermore, goodwill in a professional practice entity may be attributed to the practice itself and to the professional practitioner.[2]

It should also be noted that while goodwill is technically an intangible asset, goodwill and intangible assets are usually listed as separate items on a company's balance sheet.[3][4]

Goodwill is an intangible asset. It is usually described as the difference between the sales price of a company and the value of its tangible assets. Goodwill is based on the company's reputation and customer loyalty.