Goodwill is the excess of purchase price over the fair value of net identifiable assets acquired in a business combination — representing intangible value (brand, workforce, customer relationships, synergies). A company buying $100M of net assets for $150M creates $50M of goodwill on the buyer's balance sheet. Goodwill isn't amortized under GAAP (changed in 2001) but tested annually for impairment — write-downs can be massive (HP/Autonomy: $8.8B; AOL/Time Warner: $54B). Goodwill is the most subjective major balance sheet item. Heavy goodwill often signals serial acquisition strategy; impairment write-offs reveal which acquisitions destroyed value.
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Goodwill
August 22, 2026 · Aditya Gupta
Accounting
Related terms
Accounts Payable
Accounts Payable (A/P) is money a company owes to suppliers for goods or services received but not yet…
Accounts Receivable
Accounts Receivable (A/R) is money owed to a company by customers for goods or services delivered on credit.…
Accrual Accounting
Accrual accounting recognizes revenues when earned (regardless of cash receipt) and expenses when incurred (regardless of cash payment)…
Accrued Expense
An accrued expense is a cost recognized in the income statement before cash is paid — recorded as…
Amortization
Amortization is the systematic allocation of intangible asset cost over its useful life — analogous to depreciation but…
Audit
An audit is an independent examination of a company's financial records, internal controls, and statements — typically conducted…
