It stands for goodwill write-off; Goodwill is an asset (intangible asset) whose value is reflected in the amount by which the assets of an entity exceed their collective book value. Goodwill embodies the future economic benefits that are, or can be, produced from a group of assets acquired in a business combination that cannot be individually identified and separately recognized. Generally speaking, it is calculated as the difference between an entity’s purchase or sale price minus its book value (or any other relevant measure such as fair value of net assets acquired in a business combination).

Goodwill is the reputation of an entity (typically, a business entity), that’s not easily tradeable on its own (there is no readily available market for goodwill trading). In accounting, it will always have a debit balance. As an asset, it also needs to be written off over its useful life, though this not always the case. Specific entities build up their reputation and goodwill over time, and more time such entities remain in business the more goodwill they accumulate.

In general, and under normal conditions, the write off of goodwill aims to match the revenue with expenses (the matching concept). Write off is a reduction in the recorded value of goodwill over time (period to period), in a manner similar to amortization. It is carried out by means of a test (for goodwill impairment) in an ex-post manner.

Goodwill write-offs are the natural result of a business combination (e.g., acquisition) that is transacted and paid for with overpriced shares. Write-offs reflect the effects of economic condition in the environment in which an entity operates (recession, downturn, etc.)

The write-off is a non-cash item that reduces the amount initially recognized as the excess of purchase price over fair value of net assets acquired.