# What goodwill does the deal create?

Computes the goodwill from buying a business: the purchase price minus the fair value of the identifiable assets net of the liabilities assumed, or the bargain purchase gain when the price is lower.

- Page: https://www.acalculator.org/finance/goodwill-calculator
- JSON spec: https://www.acalculator.org/finance/goodwill-calculator.json
- Version: 333ea90f7b9c

## Default answer

Example with the default inputs (Purchase price $1,200,000.00, Identifiable assets at fair value $1,500,000.00, Liabilities at fair value $500,000.00): Paying $1,200,000.00 for net identifiable assets of $1,000,000.00 creates goodwill of $200,000.00.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| price | Purchase price | The fair value of everything paid for the business: cash, shares and other consideration. |
| assets | Identifiable assets at fair value | The fair value of the assets acquired that can be identified, including intangibles such as patents and customer lists. |
| liab | Liabilities at fair value | The fair value of the liabilities the buyer takes on. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| goodwill | Goodwill | Purchase price − (identifiable assets − liabilities), when the price is higher; otherwise $0. |
| net | Net identifiable assets | Identifiable assets − liabilities, at fair value. Negative when the liabilities are larger. |
| gain | Bargain purchase gain | Net identifiable assets − purchase price, when the price is lower. Shown only then. |
| share | Goodwill share of the price | Goodwill ÷ purchase price × 100. Shown when there is goodwill and the price is above $0. |

## Method

Net identifiable assets = identifiable assets − liabilities, at fair value. Goodwill = purchase price − net identifiable assets when that is above $0; when it is below, goodwill is $0 and the bargain purchase gain is net identifiable assets − purchase price.

## Assumptions

- The buyer acquires 100% of the business.
- Assets and liabilities are at their fair values on the purchase date, not their book values.
- Arithmetic is exact on the typed decimals; money shows to the cent and the share to 2 decimals, halves up.

## Worked examples

1. price = $1,200,000.00, assets = $1,500,000.00, liab = $500,000.00 gives goodwill = $200,000.00, net = $1,000,000.00, share = 16.67%. Source: OpenStax, Principles of Financial Accounting, 11.1 Distinguish between Tangible and Intangible Assets (goodwill is recorded when the purchase price is in excess of the fair value of the identifiable net assets). https://openstax.org/books/principles-financial-accounting/pages/11-1-distinguish-between-tangible-and-intangible-assets.
2. price = $700,000.00, assets = $1,000,000.00, liab = $200,000.00 gives goodwill = $0.00, net = $800,000.00, gain = $100,000.00. Source: IFRS Foundation, IFRS 3 Business Combinations, overview (the acquirer allocates the cost to the identifiable assets and liabilities at fair value and the rest to goodwill; an excess of the assets and liabilities over the consideration paid is a bargain purchase, recognised in profit or loss). https://www.ifrs.org/issued-standards/list-of-standards/ifrs-3-business-combinations/.
3. price = $3,456,789.12, assets = $2,345,678.90, liab = $123,456.78 gives goodwill = $1,234,567.00, net = $2,222,222.12, share = 35.71%. Source: OpenStax, Principles of Financial Accounting, 11.1 Distinguish between Tangible and Intangible Assets (goodwill is recorded when the purchase price is in excess of the fair value of the identifiable net assets). https://openstax.org/books/principles-financial-accounting/pages/11-1-distinguish-between-tangible-and-intangible-assets.
4. price = $500,000.00, assets = $500,000.00 gives goodwill = $0.00, net = $500,000.00. Source: OpenStax, Principles of Financial Accounting, 11.1 Distinguish between Tangible and Intangible Assets (goodwill is recorded when the purchase price is in excess of the fair value of the identifiable net assets). https://openstax.org/books/principles-financial-accounting/pages/11-1-distinguish-between-tangible-and-intangible-assets: no excess over the fair value of the net assets, so no goodwill.

## FAQ

### What is goodwill?

Goodwill is the part of a business's purchase price that pays for things that cannot be separately identified and valued, such as strong management, a skilled workforce, quality products, a good location and its reputation. The buyer records it as an intangible asset.

### How do I calculate goodwill?

Subtract the liabilities assumed from the identifiable assets acquired, both at fair value, to get the net identifiable assets. Then subtract them from the purchase price. Paying $1,200,000 for assets of $1,500,000 and liabilities of $500,000 gives goodwill of 1,200,000 − 1,000,000 = $200,000.

### Why use fair value and not book value?

IFRS 3 has the buyer allocate the price to the identifiable assets and liabilities at their fair values on the purchase date. Book values on the seller's balance sheet can be far from what the assets are worth that day.

### What if the price is less than the net assets?

Then there is no goodwill. The buyer has made a bargain purchase and records the difference as a gain in profit or loss. Paying $700,000 for net identifiable assets of $800,000 gives a gain of $100,000.

### What are identifiable intangible assets?

Intangible assets the buyer can name and value on their own, such as patents, copyrights, franchises, licences, trademarks and sometimes software. Their fair values go into the identifiable assets, so only what is left over becomes goodwill.

### Where does goodwill show up?

On the buyer's balance sheet, as an intangible asset. Companies typically record goodwill when they buy another business for more than the fair value of its identifiable net assets; Apple's 2017 balance sheet showed $5,717,000,000 of goodwill from businesses it had bought.

## Sources

- OpenStax, Principles of Financial Accounting, 11.1 Distinguish between Tangible and Intangible Assets: goodwill is the value of favourable factors a business has; it is recorded when the purchase price is in excess of the fair value of the identifiable net assets. https://openstax.org/books/principles-financial-accounting/pages/11-1-distinguish-between-tangible-and-intangible-assets (retrieved 2026-10-19)
- IFRS Foundation, IFRS 3 Business Combinations, overview: the acquirer measures the cost at the fair value of the consideration paid, allocates it to the identifiable assets and liabilities at their fair values and the rest to goodwill, and recognises any excess of the assets and liabilities over the consideration (a bargain purchase) in profit or loss immediately. https://www.ifrs.org/issued-standards/list-of-standards/ifrs-3-business-combinations/ (retrieved 2026-10-19)