IS GOODWILL A FICTITIOUS ASSET?

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No, Goodwill is not a fictitious asset. Goodwill is an intangible asset instead.

To better answer this question, let's first define some key concepts.

What are fictitious assets?

Fictitious assets are assets that have no tangible existence and no sellable value.

Fictitious assets represent actual cash expenditures that are deducted from profits.

What are intangible assets?

Intangible assets are assets that lack physical form but have long-term value to the business.

Just like fictitious assets, intangible assets have no physical form but they can provide identifiable economic benefit to the business.

Why is Goodwill not a fictitious asset?

Goodwill is not a fictitious asset due to two reasons: 

1. Goodwill is not an expense: Fictitious assets are typically treated as expenses that are subtracted from a company's profits.

On the other hand, Goodwill is not an expense because it is created over time.

It results from the good name, reputation and connections of a company.

2. Goodwill has sellable value: One defining feature of Fictitious assets is that they have no realizable or sellable value.

It’s the benefit and advantage of a company’s good name, reputation, and connections.

Goodwill has a sellable value which is estimated in monetary terms.

It's possible to buy and sell goodwill. Therefore, goodwill is not a fictitious asset.

The bottom line

Although goodwill and fictitious assets share some similarities, such as intangibility, Goodwill is not a fictitious asset.

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