When one business buys another for more than the value of its net identifiable assets, the excess is goodwill — the value of reputation, customer relationships and brand.
This guide explains goodwill, how it arises and how it is treated.
What is goodwill?
Goodwill is an intangible asset recognised when a business is acquired for more than the fair value of its net assets. Internally generated goodwill is generally not recorded.
Under current standards, purchased goodwill is tested for impairment rather than routinely amortised in Ind AS.
Frequently asked questions
How does goodwill arise?
When a business is purchased for more than the fair value of its identifiable net assets, reflecting reputation, brand and customer base.
Can I record self-generated goodwill?
No. Only purchased goodwill from an acquisition is recognised in the accounts.