Goodwill

Historically, goodwill was used as a basket term given to the intangible assets that arise when one company acquires another for a price higher than the fair value of its identifiable assets. It represents the premium paid for hard-to-quantify factors such as reputation, customer loyalty, brand recognition and strategic market positioning. However, goodwill alone is a poor representation of a company’s true intangible asset value because it captures multiple residual elements into a bundled form. To truly understand the value of a company, it is essential to conduct a comprehensive analysis that identifies each asset separately, such as brand equity, intellectual property, patents, customer relationships and proprietary tech. This granular approach provides a more meaningful snapshot of everything that contributes to a company’s overall value.