Goodwill represents an amount to be readily paid by a potential buyer for a company as a whole, including the value of individual assets and taking into account all debt. Factors affecting this value may, for example, be the company's customer base, patents, brands and know-how. Therefore, goodwill is an immaterial asset. For the purposes of producing a balance sheet, the following types of goodwill are to be differentiated:
This emerges during company purchase; it may be entered onto the balance sheet and written off over a maximum of four years, or according to plan over the presumed useful life.
By contrast, this is a self-generated goodwill which, according to the German Commercial Code, may not be entered onto the balance sheet.