What type of asset is represented by goodwill?

Goodwill is classified as an intangible asset. This designation arises from the fact that goodwill represents the premium a company pays over the fair value of identifiable assets and liabilities when acquiring another business, reflecting factors such as brand reputation, customer relationships, and employee goodwill—elements that do not have a physical form.

Intangible assets, like goodwill, are non-physical in nature. Unlike tangible assets such as machinery or property that can be physically touched and valued based on their market price, intangible assets are valued based on their perceived benefits, competitive advantages, and the future economic benefits they are expected to generate.

Current and fixed assets refer to categories based on the liquidity and duration of use within a business. Current assets are those that are expected to be converted into cash within a year, while fixed assets are long-term physical items that are used over time. Given that goodwill does not fall under either category, it is solely recognized as an intangible asset.