Definition for : Goodwill

Goodwill is the positive difference between the purchase Cost and the fair Market value of the Assets and Liabilities acquired with a company. Goodwill may exist due to one of the following: the Assets recorded on the acquired company's Balance sheet are worth more than their historical Cost; some Assets such as patents, licenses and Market share that the company has accumulated over the years without wishing to or even being able to account for them, may not appear on the Balance sheet; the Merger between the two companies may create synergies, either in the form of Cost reductions and / or revenue Enhancement.

(See Chapters Chapter 6 Getting to grips with consolidated accounts, Chapter 7 How to cope with the most complex points in financial accounts and Chapter 13 Return on capital employed and return on equity of the Vernimmen)

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