Goodwill is an intangible asset that represents the value of a company's brand, customer relationships, and reputation. It often arises when a business is acquired for more than the fair value of its identifiable assets and liabilities. This excess amount reflects the company's potential for future earnings and its competitive advantages in the market. In accounting, goodwill is recorded on the balance sheet and is tested for impairment regularly. If a company's value decreases, the goodwill may need to be written down, impacting its financial statements. Goodwill is important for investors and stakeholders as it indicates the overall strength and stability of a business, particularly in relation to its competitors.