Definition of Goodwill

Goodwill

Excess of the purchase price over the fair market value of the net assets acquired under purchase
accounting.

Goodwill

Intangible assets of a firm established by the excess of the price paid for the going concern over the value of its assets.

Goodwill

The excess of the price paid to buy another company over the book value of
its assets and the increase in cost of its fixed assets to fair market value.

Negative goodwill

A term used to describe a situation in which a business combination
results in the fair market value of all assets purchased being more than the purchase
price.

Intangible asset

A legal claim to some future benefit, typically a claim to future cash. goodwill, intellectual
property, patents, copyrights, and trademarks are examples of intangible assets.

Purchase accounting

Method of accounting for a merger in which the acquirer is treated as having purchased
the assets and assumed liabilities of the acquiree, which are all written up or down to their respective fair
market values, the difference between the purchase price and the net assets acquired being attributed to goodwill.

Intangible fixed assets

Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).

Amortization

The write-off of an asset over the period when the asset is used. This term
is most commonly applied to the gradual write-down of intangible items, such as
goodwill or organizational costs.

Intangible asset

A nonphysical asset with a life greater than one year. Examples are
goodwill, patents, trademarks, and copyrights.

Purchase method

An accounting method used to combine the financial statements of
companies. This involves recording the acquired assets at fair market value, and the
excess of the purchase price over this value as goodwill, which will be amortized
over time.

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