Goodwill is an intangible asset that represents the value of a company’s brand, reputation, customer relationships, and other non-physical advantages.
Goodwill arises when a company is acquired for a price higher than the fair value of its net identifiable assets. The extra amount paid is recorded as goodwill in the balance sheet.
It reflects factors like brand strength, customer loyalty, strong management, and market position, which cannot be physically measured.
👉 Goodwill = Purchase Price – (Fair Value of Assets – Liabilities)
"A company buys another company for ₹10 crore, while its net assets are worth ₹8 crore. 👉 Goodwill = ₹2 crore"