Goodwill
The intangible asset recorded on a buyer's balance sheet when the acquisition price exceeds the fair value of the net identifiable assets of the acquired entity.
Also known as: Acquisition goodwill
One-line definition
Goodwill is the price premium paid for a business above the sum of its identifiable net assets — representing brand, customer relationships, workforce, and strategic value.
Accounting treatment
Under IFRS, goodwill is not amortised but tested annually for impairment. Under US GAAP, same treatment post-2001. Goodwill impairment charges run through the P&L and signal overpayment.
TS context
TS teams review goodwill on the target's balance sheet (from prior acquisitions) and assess impairment risk — unrecognised impairment is a contingent liability that affects equity value.
Related terms
Intangible Assets
Non-physical long-term assets including brands, customer relationships, technology, patents, and licences, recognised on the balance sheet.
D&A (Depreciation & Amortisation)
The systematic allocation of the cost of tangible (depreciation) and intangible (amortisation) long-term assets over their useful lives.
Enterprise Value (EV)
The total value of a business, representing what a buyer pays for 100% of the company on a cash-free, debt-free basis.