Module I· Goodwill, Intangibles & ImpairmentBasic
Question
What is goodwill and how does it arise?
Answer
Formula
```
Goodwill = Purchase price − Fair value of net assets acquired
```
Arises solely through M&A — never built up internally ('purchased goodwill').
Logic
The buyer pays more than the sum of the individual assets because of synergies, brand, customers, market position, and know-how.
Example
Acquisition 200, fair value of net assets 120, identifiable intangibles 30 → goodwill = 50.
Important (IFRS vs. local GAAP)
- IFRS 3 / IAS 36: NO scheduled amortization, impairment test only
- Local GAAP: scheduled amortization over 5-15 years
Pitch tip
In deals like Bayer-Monsanto and Linde-Praxair, 50-70% of the purchase price is goodwill — sensitive to impairment risk.