What do you mean by Goodwill ?
Goodwill refers to that intangible asset that comes into play only when a company is planning to acquire another company and is willing to pay a price that is significantly higher than the fair market value of the company’s net assets. In short, goodwill can be seen as the difference between the purchase price and the fair market value of a company’s identifiable assets and liabilities. Goodwill can be generated through various means, such as effective marketing, talented employees, innovative products or services, and favorable brand perception. It's an essential component of many mergers and acquisitions because it reflects the premium a buyer is willing to pay for the seller's reputation and customer base. However, it's crucial to note that goodwill is subject to impairment testing regularly. If the fair value of the reporting unit falls below its carrying value, impairment occurs and the goodwill must be written down.
How to Calculate Goodwill?
Goodwill calculator uses Goodwill = Consideration Paid+Fair Value of Non Controlling Interest+Fair Value of Equity Previous Interest-Fair Value of Net Assets Recognized to calculate the Goodwill, Goodwill on the Transaction represents the reputation, brand recognition, customer loyalty, and other intangible assets that contribute to a company's value. Goodwill is denoted by G symbol.
How to calculate Goodwill using this online calculator? To use this online calculator for Goodwill, enter Consideration Paid (CP), Fair Value of Non Controlling Interest (FVNI), Fair Value of Equity Previous Interest (FVEI) & Fair Value of Net Assets Recognized (FVNR) and hit the calculate button. Here is how the Goodwill calculation can be explained with given input values -> 2500 = 1300+1700+2300-2800.