I was under the impression that marketing costs fall under a cost of revenue column and goodwill is just a BS account item to account for differences in money spent and 'market value' during m&a.
"The value of a company’s brand name, solid customer base, good customer relations, good employee relations, and proprietary technology represent some reasons why goodwill exists."
The first three are directly tied to advertising and brand-building. You call it "BS" for some reason (you seem not to believe in it), but it is a real thing and we have financial methods to account for it.
> You call it "BS" for some reason (you seem not to believe in it)
The balance sheet is typically abbreviated as BS, so a BS account is a balance sheet account.
It's been a while since I've had anything to do with goodwill, but if I remember correctly it's most commonly the difference in the assets net market value and the purchase price of a company. So if company A buys company B, which has assets of $50 for $100, then they'll add $50 in goodwill to account for the difference.
This is, of course, a simplification as I'm sure goodwill is regulated under GAAP/IFRS. But it does mean that you can't use goodwill to accurately estimate the effects of brand advertising as there could reasons other than brand marketing for a company being traded above its assets' fair market value at the time of the sale.
==So if company A buys company B, which has assets of $50 for $100, then they'll add $50 in goodwill to account for the difference.==
Goodwill is an asset and we frequently see it monetized. It isn't just a made-up number to make things balance, it is a stand-in for particularly "hard-to-value" assets like perception. Ford famously licensed their logo and built a $1 billion business [0]. Prior to the licensing deal, that value would have only been captured as Goodwill on Ford's balance sheet. It is the value of the blue shield that they have built over decades of company performance and advertising.
==But it does mean that you can't use goodwill to accurately estimate the effects of brand advertising as there could reasons other than brand marketing for a company being traded above its assets' fair market value at the time of the sale.==
Goodwill is a combination of many things, one of the largest pieces being brand value. Publicly traded companies generate a Goodwill number each time they release a financial statement.
== The Intangible Valuation Renaissance: Five Methods [0]
== 3 methods for valuing intangible assets [1]:
1. Under the excess earnings method, valuators forecast the after-tax cash flow that the asset is expected to generate. This method can be the most complex (and costly), but is also usually the most accurate.
2. Under the relief from royalty method, valuators forecast the revenue that the asset is expected to generate, then apply a comparable industry royalty rate and subtract taxes.
3. Under the cost method, valuators determine the cost to develop the asset (i.e. labour and materials), plus a reasonable return on that investment. This method is often used for early-stage companies where forecasts are difficult to prepare or in instances where information doesn’t exist to use the first two methods.
== Financial Valuation: Applications and Models [2]
"Coverage includes state-of-the-art methods for the valuation of closely-held businesses, nonpublic entities, intangible, and other assets, with comprehensive discussion on valuation theory, a consensus view on application, and the tools to make it happen."
"The value of a company’s brand name, solid customer base, good customer relations, good employee relations, and proprietary technology represent some reasons why goodwill exists."
The first three are directly tied to advertising and brand-building. You call it "BS" for some reason (you seem not to believe in it), but it is a real thing and we have financial methods to account for it.