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

Other Words from goodwill Synonyms & Antonyms More Example Sentences Learn More about goodwill

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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

Building up some extra goodwill is important for a brand like Harry’s—still an upstart in the razor world compared to the likes of Gillette. — Cam Wolf, GQ, "The Rules of the Gym, According to the Hot Dudes of ‘Insecure’," 21 June 2018 More important, the Western economic order, and the American dollar in particular, depends on Chinese goodwill far too much for statesmen to risk antagonizing Beijing with reckless rhetoric. — Peter Slezkine, The New Republic, "What Happened to the “Free World”?," 22 May 2018 Multiple studies have shown that employees respond much better to goodwill and appreciation, which is the core tenet of this book. — Charlotte Cowles, The Cut, "7 Books to Read if You’re a First-time Boss," 16 May 2018 Xi and his guest struck a series of poses that suggested bonhomie and goodwill between the leaders of the world’s two most populous countries. — Sadanand Dhume, WSJ, "Modi Signals Weakness by Making Nice With China’s Xi," 3 May 2018 One possible outcome Friday, aside from a rise in general goodwill between the countries, could be a proposal for a North Korean freeze of its weapons ahead of later denuclearization. — Foster Klug, BostonGlobe.com, "How sports prepared one of Boston’s most successful businessmen for primetime," 27 Apr. 2018 One possible outcome Friday, aside from a rise in general goodwill between the countries, could be a proposal for a North Korean freeze of its weapons ahead of later denuclearization. — Time, "Kim Jong Un Says He and South Korean President Moon Jae-In Are on the Starting Line of a New Korean History," 27 Apr. 2018 One possible outcome Friday, aside from a rise in general goodwill between the countries, could be a proposal for a North Korean freeze of its weapons ahead of later denuclearization. — Washington Post, "Kim Jong Un makes history, crosses border to meet his rival," 26 Apr. 2018 One possible outcome Friday, aside from a rise in general goodwill between the countries, could be a proposal for a North Korean freeze of its weapons ahead of later denuclearization. — Foster Klug, chicagotribune.com, "Kim Jong Un walks south to meet his rival, but will progress follow?," 26 Apr. 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

11 Nov 2018

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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.