Goodwill

Accounting goodwill is invoked in situations concerning corporate acquisitions. Goodwill is the premium paid for a company above fair value (i.e. above its net asset valuation). It is carried as an asset on the balance sheet. Companies pay acquisition premiums both to incentivise boards and shareholders to approve transactions, but also for the intangible value of things like the reputation and brand value of the company being acquired, its client list, proprietary software or skilled workforce. In accounting goodwill does not need to be amortised like tangible assets; nor does goodwill have a finite lifetime.

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