Definition of goodwill
The acquisition cost of a company reflects what the business is worth. The balance sheet value of the company reflects the historical cost of the net assets. Goodwill is the difference between the two and it arises when a new company is incorporated into an existing group's balance sheet. Goodwill will be most significant in industries which are not assets-based, such as service businesses. Goodwill will be of much less significance to property companies. Goodwill is included in the balance sheet as an intangible asset and reviewed annually for impairment.
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