Let's say you own a car yard. You have a chunk of land, a building, and some stock. Those might go on the books as simple assets of ten million bucks.
You decide to sell the business. You want to retire, you entertain offers. The winning offer is fifteen million dollars. The purchaser now has something they paid $15m for. The actual assets are only $10m. How you you account for that in double-ledger accounting? You put $5m down to goodwill.
That's the grossly simplified version. It's the difference between tangible, obvious assets (cash, property, stock, etc), and the intangibles that a buyer might pay a premium for.
At heart it's a reasonable enough convention. You can do all sorts of too-clever-for-our-own-good stuff with it but you know what, that's true of basically every accounting construct.
You decide to sell the business. You want to retire, you entertain offers. The winning offer is fifteen million dollars. The purchaser now has something they paid $15m for. The actual assets are only $10m. How you you account for that in double-ledger accounting? You put $5m down to goodwill.
That's the grossly simplified version. It's the difference between tangible, obvious assets (cash, property, stock, etc), and the intangibles that a buyer might pay a premium for.
At heart it's a reasonable enough convention. You can do all sorts of too-clever-for-our-own-good stuff with it but you know what, that's true of basically every accounting construct.