Goodwill Calculator

About this calculator

Goodwill is what an acquirer pays above and beyond the fair value of a target company’s identifiable net assets — the premium for things a balance sheet can’t line-item, like brand reputation, customer relationships, workforce know-how and expected synergies. The formula is straightforward: goodwill = purchase price − fair value of identifiable net assets, where identifiable net assets equal the fair value of tangible and identifiable intangible assets minus assumed liabilities. If the purchase price is actually below fair value of net assets, accountants record a “bargain purchase gain” instead.

Corporate development teams, M&A advisors and accountants calculate goodwill during every acquisition close under US GAAP (ASC 805) or IFRS (IFRS 3), because the resulting figure gets booked as an intangible asset on the combined company’s balance sheet and must be tested for impairment at least annually thereafter. Getting the fair-value-of-net-assets side right — not just book value — is what separates an accurate goodwill figure from a distorted one.

This calculator takes the purchase price and the fair value of the target’s identifiable net assets and returns the resulting goodwill (or bargain purchase gain), so you can see exactly what premium is being paid in a deal.