Accounting Goodwill

Goodwill is defined as the difference between the market value of a business and the net asset value. Goodwill on a balance sheet represents intangible assets which are given “value” from expected future profits.  Historically there have been four ways to acquire goodwill on the balance sheet: through the acquisition of an existing business; from extensive advertising; by capitalizing startup losses; and through an arbitrary writeup. The last three are no longer permitted. The first does not apply to worker cooperatives which can have no accounting goodwill. The pooling of interests (adding the balance sheets) in a merger or acquisition is most applicable to worker cooperatives.

Without accounting goodwill, investments in a worker cooperative will be secured by real assets. This distinguishes them from claims on future profits that are not backed by assets and rely on the cooperative making money in the future.

Also see the abolish human rentals goodwill section.