Goodwill is an intangible asset

Goodwill consists of the advantage a business has in connection with its customer, employees and out side parties with whom it has to contact. That is why it was define as the probability that the old customer will resort to the old place. Goodwill has been said to be attractive force which brings in customer. Thus, to determine the nature of goodwill in a particulars case, it is necessary to consider the type of business and the type of customers which such a business is inherently likely to attract as well as surrounding circumstances of each case. Goodwill of a business is a composite thing referable in part to its locality, in part to the way in which it is conducted and personality of those who conduct and in part to the likelihood of competition. According to Braden and Allyn, “Goodwill is an intangible asset compounded from a variety of successful business ingredients – competent and energetic management, customer acceptance, a favorable location, a quality and profitable product, efficient production method, an outstanding reputation, plus the expectation that these ingredient, will continue to produce an above normal rate of return for an indefinite period of time “

Goodwill is sometimes described as a momentum or a push ‘ that keeps the business going without further effort like the momentum of a body that continues its motion against a retarding force till it comes to rest gradually. When a man pay for goodwill, he pays for something which places him in the position of being able to earn more than he would be able to do by his own unaided efforts. Goodwill is thus present value of a firm’s anticipated excess earnings. It is the extra saleable value attaching to a prosperous business beyond the intrinsic value of net assets.