What is goodwill and goodwill impairment and why does it go with operating expenses?
In: Other
It’s the dollar amount a company pays to buy another company above the book value of the company they are buying. Book value being the dollar value of the assets when the asset was purchased. So things like reputation, logo, client base all add to the value of a company you’re buying. But the company you’re buying doesn’t have this on their balance sheet so you can’t add it to yours. In order for your balance sheet to balance, you can’t spend money without showing where you spent it. So the placeholder (Goodwill) for this value was created. And the rest of the company you bought goes under the other asset categories like property, buildings, cash, etc.
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