Goodwill is recognized in a partnership when a new partner is admitted. Goodwill is the value of the reputation and customer loyalty of the partnership that is not directly attributable to any specific partner. When a new partner is admitted, they are entitled to a share of the partnership's goodwill, which is usually calculated based on the profits of the partnership over a certain number of years. This share of goodwill is recorded in the partnership's books and is then distributed among the partners based on their agreed profit-sharing ratio.