Goodwill (accounting)

rdf:langString Goodwill (accounting)

rdf:langString In accounting, goodwill is an intangible asset recognized when ownership of a firm is transferred as a going concern. It represents the value of a firm's intrinsic ability to retain customer business, where that value is not otherwise attributable to brand name recognition, contractual arrangements or other specific factors. Goodwill is recognized only through an acquisition; it cannot be self-created. It is the excess of the "purchase consideration" (the money paid to purchase the asset or business) over the net value of the assets minus liabilities. It is classified as an intangible asset on the balance sheet, since it can neither be seen nor touched. Under US GAAP and IFRS, goodwill is never amortized, because it is considered to have an indefinite useful life. (Though private companies in the United States may elect to amortize goodwill over a period of ten years or less under an accounting alternative from the Private Company Council of the FASB.) Instead, management is responsible for valuing goodwill every year and to determine if an impairment is required. If the fair market value goes below historical cost (what goodwill was purchased for), an impairment must be recorded to bring it down to its fair market value. However, an increase in the fair market value would not be accounted for in the financial statements.