What is Goodwill?

In accounting, goodwill is when a business has somehow paid the past owners a price over the book price of the original business and now capitalises this premium in the books of the acquired business. At the same time, we may say we do things out of goodwill, basically for free or token, as an act of kindness towards people. Most of the time these are towards strangers, or clients, customers. It may or may not involve expectations for reciprocation.

Now the last part of the previous paragraph is the part that I think is the most tricky thing about goodwill. There’s a sense, in our modern world where there is always a chance of repeated interaction, that goodwill is worthwhile and also worth multiplying. At some point or in some way, it gets reciprocated in profound ways. Some might think of it as Karma – or at least just the positive sort of it.

What I think is strange is that the use of the term goodwill in accounting or business may have contaminated our sense of what it really is. I personally identify the non-business ‘goodwill’ to be something in a spirit of generosity and giving, whereas in business and on commercial basis, goodwill is treated like an asset, something that is supposed to bring value – therefore the returns that reciprocation of a kind gesture might bring.

Maybe it’s me thinking too much about semantics – but it matters.