goodwill

noun
good·​will | \ ˌgu̇d-ˈwil How to pronounce goodwill (audio) \

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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Other Words from goodwill

good-willed \ ˌgu̇d-​ˈwild How to pronounce good-willed (audio) \ or less commonly goodwilled adjective

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 Douglas was also known for his humanitarian work and was a goodwill ambassador for the U.S. State Department since 1963. Bryan Alexander, USA TODAY, "Legendary icon and 'Spartacus' star Kirk Douglas dies at 103: Reports," 6 Feb. 2020 In the first round of direct talks in October, Sudanese authorities worked to restore the rebels’ trust in the government through various gestures of goodwill. Washington Post, "Sudan government signs initial peace deal with rebel group," 24 Jan. 2020 That largesse has earned him plenty of goodwill among liberals. NBC News, "Who has more to fear from Bloomberg: The Democrats or Trump?," 25 Nov. 2019 Bloomberg has also earned ample amounts of goodwill from party leaders for using his fortune to help the party take back the House last year and win both chambers of the Virginia Legislature this week for the first time in decades. BostonGlobe.com, "Bloomberg’s wealth gives him options his rivals don’t enjoy - The Boston Globe," 10 Nov. 2019 For 2020, 192 new crystals were added to the orb, which feature three pineapples to signify the traditional image of hospitality and goodwill. Danielle Garrand, CBS News, "Everything you need to know about the Times Square New Year's Eve ball," 31 Dec. 2019 The Financial Accounting Standards Board, which sets U.S. accounting standards, is focusing on the issues of differentiating liabilities from equity and improving the measurement of goodwill for at least the first half of next year. Mark Maurer, WSJ, "CFOs’ Concerns About the Economy, Talent Shortage Seep Into 2020," 31 Dec. 2019 Their work has generated lots of goodwill among Sonora residents. Rafael Carranza, azcentral, "Mothers lead movement to find missing loved ones amid Mexico's raging drug war," 27 Dec. 2019 But goodwill alone can’t fix weak policymaking rooted in bad data. Bright Simons, Quartz Africa, "Ghana’s Year of Return is on its way to success so the government should stop using bad data," 20 Dec. 2019

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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First Known Use of goodwill

before the 12th century, in the meaning defined at sense 1a

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Time Traveler for goodwill

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

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Statistics for goodwill

Last Updated

18 Feb 2020

Cite this Entry

“Goodwill.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/goodwill. Accessed 20 Feb. 2020.

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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
How to pronounce goodwill (audio)

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

goodwill

noun
good·​will | \ ˈgu̇d-ˈwil How to pronounce goodwill (audio) \

Kids Definition of goodwill

: kind feelings or attitude

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goodwill

noun
good·​will | \ ˈgu̇d-ˌwil How to pronounce goodwill (audio) \

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.

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