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Goodwill in Accounting: Understanding the Hidden Value in Business Acquisitions
When one company buys another, the purchase price often exceeds the fair value of the acquired business’s tangible and identifiable intangible assets. The extra amount paid—beyond machinery, inventory, patents, or buildings—reflects something less tangible but equally powerful: the company’s reputation, customer loyalty, and future earning potential. In accounting, this difference is recognized as goodwill. Though…