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Goodwill is simply the difference between book value and price paid for an acquired company. For instance when Google bought YouTube for a billion it was almos

Goodwill is simply the difference between book value and price paid for an acquired company. For instance when Google bought YouTube for a billion it was almost all recorded as a Goodwill asset. Each year, Google must decide if YouTube continues to be worth at least a billion dollars, otherwise they may need to write down the goodwill, much like any other impaired asset. Buying companies are like buying other assets except they don't depreciate on the books and are called goodwill. Writedowns of goodwill are the same as any other asset impairment. I really wish goodwill was called "acquisition premium" and everyone would get it.

sonnyblarney 8y ago
" Writedowns of goodwill are the same as any other asset impairment." Technically yes, but really no. Most other assets have an objective value. When companies buy others, they are buying brand, talent, future revenues, often at crazy massive premiums. That's where the inherent intangibility comes in. There's just no way for investors to really nail down why a given acquisition might be had for this or that much. Companies are bought for often nebulous reasons, so these writedowns often skew the earnings in weird ways. So it's the inherent intangibility in that price ... that drives the ambiguity of a lot of goodwill. But I get what you are saying, technically it's not rocket science.