When the purchase consideration exceeds the value of business, the difference is

When the purchase consideration (the amount paid by the buyer to purchase a business) exceeds the value of the business, the difference is called goodwill. Goodwill represents the value of intangible assets such as reputation, customer loyalty, brand recognition, and intellectual property that are not recorded on the balance sheet but are expected to contribute to the future profitability of the business. Goodwill is an important asset for businesses that rely on customer relationships, such as service businesses or those with strong brands. It is recorded as an asset on the balance sheet and is subject to periodic impairment tests to ensure that it is not overvalued.