Final answer:
Goodwill is an intangible asset on the balance sheet, representing the excess of consideration paid over the fair value of net identifiable assets when one company acquires another. It is crucial for showing a company's financial health and is a part of a bank's net worth.
Step-by-step explanation:
An intangible asset that is measured as the consideration paid less the fair value of the net identifiable assets is called goodwill. When a company acquires another business, the amount they pay over and above the fair value of the net tangible and intangible assets is recorded as goodwill on the balance sheet. This item represents the future economic benefits arising from assets that are not capable of being individually identified and separately recognized, such as a strong brand reputation, customer relationships, or proprietary technology.
Goodwill is an important part of bank capital, which signifies a bank's net worth. Recognizing and measuring goodwill is crucial for presenting a fair view of a company's financial health. It is not a physical asset like coins and currency in circulation nor is it commodity money, as its value doesn't come from a physical form but rather from the potential future benefits the acquired assets will bring to the company.