Originally Posted by jsloan

Goodwill on an annual report has nothing to do with the way that customers feel about a company. It's a way to carry over acquisition costs of another company when you pay in excess of book value for their assets. (See a definition here). Basically, if company A acquires company B, you add up all of the fixed (tangible) assets of company B, and any excess goes onto A's books as goodwill, which is then amortized over time. This means that a company that spends $2B above book price to acquire a company doesn't have to incur a $2B loss in the year where the acquisition is finalized; instead, they might write off $200M in goodwill per year for ten years.