Define goodwill. When is it appropriate to record goodwill as an intangible asset?
Goodwill represents an intangible asset that exists because of the good reputation, customer appeal, and general acceptance of a business. Goodwill has value because other parties often are willing to pay a substantial amount for it when they buy a business. Goodwill should be recorded in the accounts and reported in the financial statements only when it has been purchased at a measurable cost. The cost of goodwill is measured in conformity with the cost principle. Because it is considered to have an indefinite life, goodwill is not amortized, but it is reviewed annually for impairment of value
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