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 ?
Discussions about the existence of purchased goodwill and how it should be treated are far from new.
* 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.
Thus, although the goodwill is amortizable in X's hands, if X contributes its purchased goodwill to Z and Z is related to Y because Y has a greater-than-20% interest in Z, the goodwill contributed by X will cease to be amortizable goodwill; X, thus, will not obtain the benefit of amortizable tax basis.
As previously noted, the long-standing required treatment of purchased goodwill was its systematic amortization over a maximum of 40 years.
The first involves determining whether two separate methods of accounting for business combinations--purchase and pooling of interests--are justified, and the second is determining the appropriate method of charging to income the cost of purchased goodwill and other purchased intangibles.
The purchase method establishes a new measurement basis for already recognized assets and liabilities of the acquiree, as well as recognizing and measuring additional assets and liabilities (including purchased goodwill) not previously recognized.
Despite winning a higher sale price than expected, after expenses, overseas taxation and the reinstatement of pounds 50 million of purchased goodwill, McKechnie will have to book a loss on the transaction of pounds 10 million.
company capitalizing purchased goodwill and amortizing it over a 40-year period in accordance with U.S.
Noncontrolling interest of $250,000 = 0.2 x [$100,000 + $400,000] (S Company's stockholders equity) + 0.2 x [$900,000 - $500,000] (identifiable asset revaluation) + [$450,000 (total goodwill) - $380,000 (purchased goodwill)] = $100,000 + $80,000 + $70,000.
Instead purchased goodwill will remain on the balance sheet as an asset subject to impairment reviews.
Although much attention has been given to goodwill by analysts in the marketplace, little, except the recording of purchased goodwill, has been reported in the balance sheet which accountants offer as a measuring instrument.

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