Definition of goodwill
1a : a kindly feeling of approval and support : benevolent interest or concern people of goodwillb (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 goodwillb : willing effort
From the M-W Editors
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 of goodwill from the Web
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A Delta representative contacted you and explained the circumstances, and offered you a choice of either 20,000 miles or a $200 flight voucher as a goodwill gesture.
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A Delta representative contacted you and explained the circumstances, and offered you a choice of either 20,000 miles of a $200 flight voucher as a goodwill gesture.
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Perhaps Microsoft could win back some goodwill by giving all H:MCC owners free digital licenses for its 360 equivalents, but that would still leave Halo 2: Anniversary, a H:MCC exclusive, in the dust.
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His passion for the ocean, his passion for rescuing animals, his passion for helping people and his passion for spontaneous goodwill.
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Positive media buzz, A-list friends and loads of goodwill flowed to a 33-year-old who had seemingly learned from his mistakes.
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There's a lot of goodwill to be earned by taking the simplest of steps, and its frustrating to see movies that look genuinely good leave it on the table.
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New England Patriots quarterback and Super Bowl champion Tom Brady recently went on a goodwill trip to Japan with Under Armour and interacted with many of the community's fans.
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A good reflection of the new thinking is the UN’s latest goodwill ambassador to refugees, Yusra Mardini, a young woman who fled Syria in 2015.
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.
First Known Use of goodwill
before 12th century
Financial Definition of GOODWILL
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.
GOODWILL Defined for English Language Learners
goodwill
playDefinition of goodwill for English Language Learners
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: a kind, helpful, or friendly feeling or attitude
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business : the amount of value that a company's good reputation adds to its overall value
GOODWILL Defined for Kids
goodwill
playDefinition of goodwill for Students
: kind feelings or attitude
Law Dictionary
goodwill
playLegal 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
Additional Notes on goodwill
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.
Learn More about goodwill
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See words that rhyme with goodwill Thesaurus: All synonyms and antonyms for goodwill Spanish Central: Translation of goodwill Nglish: Translation of goodwill for Spanish speakers Britannica English: Translation of goodwill for Arabic speakers
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