Goodwill
(Intangible Asset).
Formula
Goodwill = Purchase Price − Net Asset Value
Real World
When Facebook acquired Instagram for $1 billion in 2012, the vast majority of that price was goodwill — paying for brand potential and user base, not physical assets.
Exam Focus
In acquisition questions, show you understand goodwill as the premium over book value and explain why a buyer might justify paying it.
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