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The Finance Book by Si Hussain, Stuart Warner

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10 Goodwill and other intangibles

‘There’s a crazy amount of goodwill, and I don’t know where it came from…’

Feist, Canadian musician

In a nutshell

A company is typically worth more than the sum of its parts and this difference is due to goodwill. Goodwill (also referred to as ‘inherent goodwill’) is a hidden asset in most businesses and exists because of factors such as reputation, location, market position, customer and employee loyalty, etc.

What makes goodwill unique and distinguishes it from other assets is that it cannot be separated from the business to which it relates, i.e. it cannot be sold or transferred, or exist separately from the business. It can be thought of as DNA value in a business.

Given its rather nebulous nature, accounting ...

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