goodwill

noun

good·will | \ ˌgu̇d-ˈwil

Definition of goodwill

1a : a kindly feeling of approval and support : benevolent interest or concern people of goodwill

b(1) : the favor or advantage that a business has acquired especially through its brands and its good reputation

(2) : the value of projected earnings increases of a business especially as part of its purchase price

(3) : the excess of the purchase price of a company over its book value which represents the value of goodwill as an intangible asset for accounting purposes

2a : cheerful consent accepted the terms of the contract with goodwill

b : willing effort

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Examples of goodwill in a Sentence

She has goodwill toward all her coworkers. They allowed him to keep the extra money as a gesture of goodwill.

Recent Examples on the Web

Nor is this to suggest that the Singapore summit was a failure: if minimal and a little amorphous, the goodwill gestures seem real. — David Volodzko, The New Republic, "The Corporate Gangs Who Could Profit From Trade With North Korea," 26 June 2018 Aside from the political goodwill, the job expansion outside Silicon Valley could help Apple diversify beyond the iPhone. — Tripp Mickle, WSJ, "Why Apple Chose Austin, Seattle and Culver City for Its New Jobs Push," 14 Dec. 2018 Well, China enjoys enormous goodwill inside our government, inside a number of governments around the world. — Fox News, "Has China been duping the US for nearly half a century?," 13 Aug. 2018 Two days of friendly basketball games winding up Thursday in Pyongyang were the latest in a slew of goodwill gestures between the Koreas in recent months. — NBC News, "North Korea turns to basketball diplomacy ahead of Pompeo visit," 5 July 2018 Roland loves riding co-pilot in the van with Michael Pascucci, distributing mail along with smiles and goodwill, and deepening the dozens of connections he’s made around campus. — Josh Kovner, courant.com, "This Dedicated Volunteer Who Works Several Jobs Also Has Down's Syndrome," 21 June 2018 North Korea has shown some goodwill: halting missile tests for six months so far, and last week demolishing key areas of its nuclear test site in front of international journalists. — CBS News, "Trump hints at longer path for North Korea to denuke," 2 June 2018 North Korea has made some very public goodwill gestures, inviting foreign journalists to witness the dismantling of some nuclear infrastructure and releasing three US prisoners. — Nicole Gaouette, CNN, "Trump's canceled North Korea summit could mean pitfalls ahead," 25 May 2018 In the end, the British leader left with a feeling of goodwill that had been absent until then. — Jonathan W. Jordan, WSJ, "‘The Kremlin Letters’ and ‘The Allies’ Review: The View From the Summit," 30 Nov. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'goodwill.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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Last Updated

7 Jan 2019

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The first known use of goodwill was before the 12th century

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More Definitions for goodwill

goodwill

noun

Financial Definition of goodwill

What It Is

Goodwill is the excess of purchase price over the fair market value of a company's identifiable assets and liabilities.

How It Works

Goodwill is created when one company acquires another for a price higher than the fair market value of its assets; for example, if Company A buys Company B for more than the fair value of Company B's assets and debts, the amount left over is listed on Company A's balance sheet as goodwill.

The account for goodwill is located in the assets section of a company’s balance sheet. It is an intangible asset, as opposed to physical assets like buildings and equipment.

Goodwill is an accounting construct that is required under Generally Accepted Accounting Principles (GAAP). The concept can be best illustrated with an example:

Assume that Company ABC wants to acquire Company XYZ. ABC purchases all of the outstanding stock of XYZ for $8,000,000. On the acquisition date, Company XYZ lists the following assets and liabilities:

An appraisal estimates the fair market value (FMV) of the PP&E at $7 million. The book value of all the other assets and liabilities is equal to FMV.

The fair value of XYZ's assets and liabilities is $2,000,000 + $7,000,000 - $4,000,000 = $5,000,000. We leave out the goodwill listed on XYZ's balance sheet because it's not a real asset being purchased by ABC -- it's an accounting construct XYZ was required to list pursuant to a prior acquisition.

ABC paid $8,000,000 for the stock, so on its next balance sheet, ABC will list an account called Goodwill that will have a value of $3,000,000.

The stock of many well-known companies is worth more than the value of their assets. To cite notable examples, the majority of Coca-Cola's share value is not in its brick-and-mortar bottling plants, but instead in the brand name and "secret formula" of its storied soft drink brand.

Why It Matters

Even though goodwill is listed as an asset, it can't be bought or sold. Many analysts prefer to not consider it when they are examining a firm's assets. One commonly used measure is "tangible book value," which excludes non-cash balance sheet items like goodwill and amortization.

The appropriate value of goodwill is very hard to define. It is possible for an acquiring company to pay too much for the acquiree, and if the acquired net assets fall in value, the acquiring company must write them down (a process called "impairment"). Impairment charges flow to the income statement, and will negatively affect EPS and the firm's stock price.

Source: Investing Answers

goodwill

noun

English Language Learners Definition of goodwill

: a kind, helpful, or friendly feeling or attitude

business : the amount of value that a company's good reputation adds to its overall value

See the full definition for goodwill in the English Language Learners Dictionary

goodwill

noun

good·will | \ ˈgu̇d-ˈwil

Kids Definition of goodwill

: kind feelings or attitude

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goodwill

noun

good·will | \ ˈgu̇d-ˌwil

Legal Definition of goodwill

1 : an intangible asset that is made up of the favor or prestige which a business has acquired beyond the mere value of what it sells due to the personality or experience of those conducting it, their reputation for skill or dependability, the business's location, or any other circumstance incidental to the business that tends to draw and retain customers

2a : the value of projected increases in the earnings of a business especially as part of its purchase price

b : the excess of the purchase price of a business above the value assigned for tax purposes to its other net assets

Note: The Internal Revenue Code requires the purchaser of a business to allocate the purchase price among the various types of assets. Frequently the purchase price is greater than the sum of the values of the individual assets. The excess is labeled goodwill. Because of its indefinite life, goodwill is not amortizable as an asset. The purchaser will therefore usually try to keep the allocation to goodwill as small as possible.