Is Goodwill A Current Asset? What Is Its Treatment In The Balance Sheet

ByAlbert Harris 15/08/202315/08/2023

Goodwill is an intangible asset that represents the excess value of a business over its net assets value. Buyer pays an extra amount to acquire an ongoing business.

Is Goodwill A Current Asset

Goodwill is one of the most elements of the company’s balance sheet but it is not a current asset because goodwill is not expected to sale or converted into cash within a short period because they have a very limited market.

Goodwill is an intangible asset representing an excess of the purchase price of the fair value of net assets when a business is acquired.

Importance Of Goodwill

Goodwill plays an important role in the development and growth of the business. The followings are the most important reasons why goodwill is important to a business.

Goodwill is a strong element that builds a strong brand reputation and value in the market
Goodwill plays an essential role in bringing customers retention
It helps to build a strong relationship between the customers and the supplier
It helps to stable in the market and support the business when entering a new market or launching a new product
It helps to build a strong relationship with the partners
It enables a brand to charge extra price because customers normally choose the best ad trusted source to purchase things
It helps a business to increase its worth and also contribute in the long run, etc.

FAQs

What type of asset is goodwill?

Goodwill is an intangible asset that shows the brand name value of a business when it is acquired.

Is goodwill a current asset or a fixed asset?

Goodwill is neither a current asset nor it is a fixed asset because it has no physical existence. It is an intangible asset and recorded as a non-current asset.

What is the simple definition of goodwill?

Goodwill is the reputation and worth of the company.

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