What are the elements of goodwill?
Posted: Mon Jan 06, 2025 5:45 am
Goodwill is an intangible asset capable of generating future benefits for a company, and corresponds to the value of the brand; that is, characteristics that are a priori invisible in accounting, such as prestige, recognition, customers, relationships with customers and employees, etc., which will ultimately increase its material value.
It is often argued that a company may be worth more than the algebraic sum of all the elements that make up its assets, and goodwill reflects this excess value.
The value of goodwill is therefore inherent to a company, but it is recorded in the accounting records only after its acquisition. It is calculated as the excess of the price paid for a company over its net worth, and is made up of the following elements, all of which are intangible:
Commercial. These are aspects such as the design of signs, slogans or symbols, the quality image of the products offered or the strategic position of the commercial premises. In terms of brand value, having the main store in the centre of a capital is not the same as having it on the outskirts of an isolated town.
Technology. This section contains the skills and knowledge acquired by the company. In other words, everything that lies behind a certain product and makes it special compared to the france number data competition. A clear example is the Coca-Cola formula or any drink whose success is directly related to very specific knowledge.
Customers. One of the company's greatest assets, perhaps the greatest, is its customer base, but not only because of the size of this base but also because of their loyalty, the qualitative part: what type of contracts they sign, how long these contracts last, how they interact with the product, etc.
Human capital . Obviously, a company that has already started and has all its employees working at full capacity is worth much more than a consolidated company or one that is on the way to becoming one. The skills of the employees and the management team are an intangible asset, but one that should be taken into account. Likewise, the regulations that govern the working conditions of the employees and the management of human resources carried out by the company would also fall into this category.
Contracts. The company's supply agreements can provide added value to the extent that they present advantageous conditions for supply. These conditions are determined by the payment period or the trust between the parties. Likewise, if the company operates under the franchise formula, this intangible called 'contracts' will be essential in defining its value.
Data . As we already know, data is becoming increasingly important in any company, because the truth is that every company handles a huge amount of data: its accounting, its customer database, its interactions on social networks, etc. These database systems, as well as the software licenses acquired to gather all the data – in apps like Holded – are assets that add value to the company.
It is often argued that a company may be worth more than the algebraic sum of all the elements that make up its assets, and goodwill reflects this excess value.
The value of goodwill is therefore inherent to a company, but it is recorded in the accounting records only after its acquisition. It is calculated as the excess of the price paid for a company over its net worth, and is made up of the following elements, all of which are intangible:
Commercial. These are aspects such as the design of signs, slogans or symbols, the quality image of the products offered or the strategic position of the commercial premises. In terms of brand value, having the main store in the centre of a capital is not the same as having it on the outskirts of an isolated town.
Technology. This section contains the skills and knowledge acquired by the company. In other words, everything that lies behind a certain product and makes it special compared to the france number data competition. A clear example is the Coca-Cola formula or any drink whose success is directly related to very specific knowledge.
Customers. One of the company's greatest assets, perhaps the greatest, is its customer base, but not only because of the size of this base but also because of their loyalty, the qualitative part: what type of contracts they sign, how long these contracts last, how they interact with the product, etc.
Human capital . Obviously, a company that has already started and has all its employees working at full capacity is worth much more than a consolidated company or one that is on the way to becoming one. The skills of the employees and the management team are an intangible asset, but one that should be taken into account. Likewise, the regulations that govern the working conditions of the employees and the management of human resources carried out by the company would also fall into this category.
Contracts. The company's supply agreements can provide added value to the extent that they present advantageous conditions for supply. These conditions are determined by the payment period or the trust between the parties. Likewise, if the company operates under the franchise formula, this intangible called 'contracts' will be essential in defining its value.
Data . As we already know, data is becoming increasingly important in any company, because the truth is that every company handles a huge amount of data: its accounting, its customer database, its interactions on social networks, etc. These database systems, as well as the software licenses acquired to gather all the data – in apps like Holded – are assets that add value to the company.