An asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised.

Source: click here‍

The difference between the fair value of a business and the recorded value of its net assets. It often arises during acquisitions when the purchase price exceeds the value of the company's identifiable assets. Goodwill reflects intangible factors such as brand reputation, customer loyalty, and employee skills.

Example:

•   Acquisition: Company A buys Company B for £5 million, even though Company B's net assets are worth only £4 million. The £1 million difference is recorded as goodwill.

Real-Life Scenario:

When a global beverage company acquires a popular local brand for £10 million, even though the brand’s net assets are only worth £7 million, the £3 million difference is recorded as goodwill, representing the value of the brand’s loyal customer base and market recognition

‍