What is Goodwill? | Understanding Intangible Assets

In this one I answer a subscriber question which was to explain what Goodwill is, how it fits within the category of intangible assets and how to approach it as a long term investor.

If you have any topics you’d like me to cover in an upcoming video, then leave your suggestions down below!

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Disclaimer:
The information in this video is general information only and should not be taken as constituting professional advice from Hamish Hodder.
Hamish Hodder is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances.
Hamish Hodder is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this video.

[nelsonlee]

Great explanation of goodwill, you made a good point when you said " goodwill cannot pay off a company debt ". Keep up the great work Hamish, your videos are solid 👍

[AndreaGonzalez-irdh]

This video was simple, easy to understand, and helped me so much ! thank you ! making my life easier !

[elizabethmaz]

Thanks that you have explained the term goodwell and I want you to explain how good will and premium are treated in the balance sheet

[amirich]

This is probably a good reason for why the Intelligent Investor recommends avoiding serial acquirers :) Great video!

[chriss.]

Dude thanks for explaining it so well!

[interabie]

great vid. quick question: after A purchases B for 80 mill, the 10 mill of goodwill shows on ... B's balance sheet? if not, why would it show on A's?

[charlizebarquin]

thanksss just subscribed cuz u explained it well! keep going! :D

[InvestingBookSummaries]

Very nice explanation. I wish the video was around when I was first trying to learn about stocks!

[jgood]

Very interesting! I'm researching a company right now whose total assets on its' balance sheet continues to decline. However, their Goodwill remains fairly stable. At first, their Goodwill was about 15% of total assets, but as total assets have declined, Goodwill now makes up about 25% of the balance sheet. I'm not sure what's normal or abnormal percentage wise, but it seems precarious that 25% of a company's balance sheet could be wiped out at any time with a Goodwill impairment.

[SuccessMindset]

1. Intangible assets have gotten more valuable recently
2. Goodwill looks to be meta for businesses
3. Goodwill is helpful for managing businesses in different niches

[lukechan]

Do credit analysts adjust goodwill out of the balance sheet when doing credit analysis of their borrower?

[cookiejar]

Great video. I realized I'm missing something when I researched Kraft Heinz and all there numbers were excellent Rule 1 style. The only reason I didn't buy it was because it was slightly above the buy price...
And then it crashed big time and everyone was saying they have too much debt. I thought how's that possible with equity to debt of 0.5? That's when I first realized what Goodwill does. So this video I'm sure it will help others a lot!

[jeffreysayed]

Do you have any videos on mergers and amalgamations?

[InvestingEducation]

Nice video. Book value is an inconsistent measure for some companies because goodwill and other intangible assets distort it.

[accountantisinvesting]

Hello Hamish, Could you please be so kind and share your opinion on this: If a company did a huge Intagible impairment, therefore it is making negative effect on income statement and mostly, net income is negative due to impairment, However, the sales itself as well as gross magin is positive as in previous quarters, Coudl you please just share theoretical opinion how this quarter fin statement results would impact the stock market by your experience after its release?, Negative net income is a bad sign or since it is due to intangible - it is not so bad?
Thanks,
regards,

[cybrainx]

Is the Book value of the target company reassessed with assets marked to market prior to calculating good will?

[LocoCocoJorge]

Great video! How does it work from the point of sale of assets? How is the goodwill portion taxed vs the tangible/equipment portion of the sale of a small business? Say, the sale price is 100K, with goodwill being 60K and equipment 40K. From what I understand goodwill is considered capital gains.Thanks again!

[jasonwyant]

Awesome job; it seems like you are taking the Ben Gram approach to Goodwill by ignoring it. However, I refer you to The Essays Of Warren Buffett by Lawrence Cunningham. There he shares Warren's advice on how investors should view Goodwill, especially the difference between Goodwill and what he calls Economic Goodwill. It's an extremely insightful lesson.

[bluestaar]

Goodwill is on the balance sheet of the company that bought or sold?

[tinypurpleplanet]

Hi Hamish, I wonder if you would have any insight on how to decipher the difference when the same company is listed on the stock exchange but in different countries e.g. .ax and .to . Do you look at the numbers are they the same company essentially? the numbers on two different listings look different...