Goodwill

What does goodwill mean?

Goodwill in an acquisition is the amount paid above the value of identifiable net assets, after appropriate measurement adjustments.

Goodwill in an acquisition is the difference between the consideration paid and the share in the fair value of identifiable net assets. Treatment depends on the form of the acquisition. A simple difference from carrying amount is not always enough.

How does it work?

Only goodwill acquired from third parties may be recognised on the balance sheet (art. 2:365(1)(d) DCC), up to at most the amount paid less amortisation (art. 2:385(4) DCC). In an acquisition, the buyer first measures the identifiable assets and liabilities at fair value (RJ 216); what the purchase price exceeds them by is goodwill.

Goodwill is amortised over the expected useful life. Only if, exceptionally, that cannot be reliably estimated does a period of at most ten years apply, with the reasons in the notes (art. 2:386(3) DCC). A write-down for lasting impairment may not be reversed later (art. 2:387(5) DCC).

Example

An installation company (BV) takes over the activities of a competitor on 1 January 2026 for € 250.000. At fair value the company vehicles are worth € 90.000, the inventory € 45.000 and the running maintenance contracts € 40.000; € 15.000 of personnel obligations transfers with them. Identifiable net assets: 90.000 + 45.000 + 40.000 − 15.000 = € 160.000. Goodwill: 250.000 − 160.000 = € 90.000. With a useful life of six years, amortisation is € 15.000 per year. For tax, at most 10%, or € 9.000 per year, is allowed (art. 3.30(2) Income Tax Act 2001), so taxable profit comes out € 6.000 higher for six years.

In the annual accounts

Intangible fixed assets or consolidation treatment; notes depend on the transaction.

Difference from self-generated goodwill

A good name, a trained team and loyal customers have value. As long as nobody has paid for it, that value cannot be reliably determined and does not appear on the balance sheet. Only when a third party buys does the amount become visible, and then only for the buyer.

Common mistakes

• Treating carrying amount as fair value
• Capitalising your own reputation without a transaction

What to watch for

• Split the purchase price: what you can attribute to contracts, software or a brand gets its own useful life and reduces the residual item.
• Support the useful life with the acquisition plan. Ten years is a safety net for exceptions, not a standard period.
• A small entity need not show the item separately (art. 2:396(3) DCC); in the published balance sheet of a medium-sized entity it does appear separately (art. 2:397(5) DCC).

Legal basis and source

art. 2:365 DCC; RJ 216

• Dutch Civil Code Book 2, article 365
• Dutch Accounting Standards Board
• Income Tax Act 2001, article 3.30

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