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 But doing so allowed him to clinch the deal with a dose of goodwill thrown in. Washington Post, "France’s Richest Man Loves Diamonds," 25 Nov. 2019 Young women compete to be named this year’s Princess Kay of the Milky Way—a goodwill ambassador for state dairy farmers—and to have their likeness carved into a 90-pound slab of butter. Katie Thornton, National Geographic, "The most absurd foods you can eat at the Minnesota State Fair," 30 Aug. 2019 Chopra is a goodwill ambassador for UNICEF, the United Nations children's agency. Julia Hollingsworth, CNN, "Pakistan calls on UNICEF to drop actress Priyanka Chopra as an ambassador," 22 Aug. 2019 The Don Diego Scholarship Foundation was named for Don Diego, AKA Tom Hernandez, who served as the fair’s welcoming goodwill ambassador from 1947-1984. Laura Groch, San Diego Union-Tribune, "23 students win $66K in Don Diego Foundation scholarships," 15 July 2019 For the last 18 years, Jolie has worked with the U.N. Refugee Agency, and she was made a special envoy in 2012 after a decade of work as a goodwill ambassador. Vogue, "Is Angelina Jolie’s Next Move Running for Office?," 3 Apr. 2019 Harry received some $3 million last year for visiting charities and army units and serving as a goodwill ambassador. David Mcclure, Town & Country, "How Queen Elizabeth's Fortune Is Divided Among the Members of the Royal Family," 16 Feb. 2019 Critics say Siegal’s notoriously brusque personality has left her without a reservoir of goodwill to draw on during her current crisis. Ben Widdicombe, Town & Country, "Tarnished by Epstein Scandal, Power Publicist Peggy Siegal Attempts a Hollywood Comeback," 6 Nov. 2019 That goodwill is largely gone now, after Trump’s decision to bow to the Turkish invasion. Elizabeth Tsurkov, The New Republic, "The Syria Withdrawal’s Other Victims," 24 Oct. 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

9 Dec 2019

Cite this Entry

“Goodwill.” The Merriam-Webster.com Dictionary, Merriam-Webster Inc., https://www.merriam-webster.com/dictionary/goodwill. Accessed 11 December 2019.

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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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