Goodwill

Goodwill is defined as an intangible asset relating to a company’s business practices. Goodwill includes assets with value that are exceptionally difficult to quantify. Examples include brand recognition, customer loyalty, and employee happiness. Goodwill helps a company remain competitive in the long term, even if the company does not produce the best product.[i]

Goodwill does not have an independent intangible value. The value of goodwill is always attached to the assets of the business.

It is not permissible to charge a separate amount for goodwill apart from the assets of the business. However, the assets of the business may be inflated to incorporate the goodwill amount.[ii]

It is incorrect to analogise goodwill on trademarks etc. The latter has independent monetary value and can be sold separately without the tangible items. This is not so in goodwill. A person will not sell the goodwill without assets. There will also be no buyers for such goodwill.