goodwill

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goodwill

n. the benefit of a business having a good reputation under its name and regular patronage. Goodwill is not tangible like equipment, right to lease the premises, or inventory of goods. It becomes important when a business is sold, since there can be an allocation in the sales price for the value of the goodwill, which is always a subjective estimate. Included in goodwill upon sale may be the right to do business without competition by the seller in the area and/or for a specified period of time. Sellers like the allocation to goodwill to be high since it is not subject to capital gains tax, while buyers prefer it to be low, because it cannot be depreciated for tax purposes like tangible assets. Goodwill also may be overestimated by a proud seller and believed by an unknowing buyer. (See: sale)

goodwill

noun altruism, amity, benefaction, benevolence, brotherhood, charity, cheerful consent, cheerful willingness, commercial advantage, cordiality, countenance, customer approval, customer encourageeent, earnestness, established patronage, established popplarity, established reputation, favor, favorable disposition, favorable regard, friendly disposition, geniality, good name, good nature, good reputation, helpfulness, humanity, known name, munificence, patronage, philanthropy, proven name, public favor, public support, sponsorship, support, sympathy, tolerance, willingness
Associated concepts: impairment of good will, sale and transfer of good will

goodwill

the advantage or benefit that is acquired by the business beyond the mere value of its capital stock or property in consequence of the patronage it receives from its customers. For example, it is usual for a business to be sold on the basis of so much for the stock and so much for the goodwill. Goodwill can also be considered as the amount by which the value of the business as a whole exceeds the assets minus the value of the company's liabilities. In another sense, it is ‘the probability that the old customers will resort to the old place’.
References in periodicals archive ?
The statement recognizes that externally purchased goodwill may actually have an indefinite useful life and, thus, should not have to be amortized over an arbitrary maximum of 40 years.
If the fair value of the purchase consideration exceeds the fair value of the net assets acquired, purchased goodwill should be recognized as an asset and measured initially at the amount of that excess.
As previously noted, the long-standing required treatment of purchased goodwill was its systematic amortization over a maximum of 40 years.
These results are not directly applicable to the proposed test for goodwill impairment because such an impairment test is for a specific asset, purchased goodwill, within an individual firm or reporting unit within the firm.
Walters said, "The IASC proposal would specify a useful life of no more than five years for purchased goodwill unless a longer period can be justified, which should not, in any case, exceed 20 years" [3:85].
The highest bid of $300 per share would have resulted in approximately $3 billion purchased goodwill, all of which evaporated when negotiations terminated 7 months later.
These are inherent goodwill and purchased goodwill.
Many accountants believe that the original value of purchased goodwill decreases over time and that it should be systematically and rationally amortized against income.
risk that purchased goodwill or intangible assets become impaired;
FASB has softened the impact of eliminating pooling by requiring that purchased goodwill be reviewed for impairment rather than be amortized.
Essentially, the project will address 1) whether there is a need for two methods of accounting for business combinations, and 2) how purchased goodwill should be accounted for.

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