Goodwill is generally considered to be the amount paid for a
business over its fair market value or its identified assets.
Examples of goodwill include the right to use the name of a
purchased business and the right to represent that the buyer in a
transaction is carrying on the purchased business as carried on by
the seller.
Beyond the necessity of including goodwill as an asset category
for tax and accounting purposes, however, is recognizing goodwill
as representing the synergy among assets used by a business to
produce income. In other words, goodwill demonstrates that
the whole is greater than the sum of its parts.
Examples of this synergy value include business longevity,
exclusive market access, competitive advantages, market share and
industry connections. Synergy value is expressed as goodwill
in transactions and is assigned a dollar value accordingly.
