Goodwill Definition

Goodwill is an intangible asset that represents the value of a business’s reputation and its relationships with customers and other stakeholders. Goodwill is not something that can be bought or sold, but it can be created or destroyed.

The concept of goodwill has been around for centuries, but it was not formally recognized as an asset on balance sheets until the early 20th century. In accounting, goodwill is considered to be an intangible asset because it is not a physical asset like land or buildings, and it is not a financial asset like cash or investments. Rather, goodwill is more like ‘brand equity’ or ‘customer satisfaction.’

While goodwill is typically associated with big businesses, any company can have goodwill. For example, a small business might have built up a good reputation in its community over many years. This good reputation would be considered goodwill. Similarly, a new business could have strong relationships with its suppliers, which could also be considered goodwill.