Goodwill falls under the “Asset” column of a company’s balance sheet, but is NOT a physical asset such as buildings or equipment.
Goodwill is a prediction/assessment on the VALUE of a company’s brand name, customer loyalty, or patents/proprietary technology.
Take Coca Cola for example.
Some could argue that people are literally addicted to Coke and no matter what price they charge, consumers will continue drinking it.
Here’s another example.
When my wife and I go out to eat and she orders a coke, sometimes the waiter replies “Is Pepsi ok with you ma’am??” She quickly replies “No it is not and chooses to have a water instead.”
These two examples display the customer loyalty and brand name recognition associated with a company. These are the types of things companies have found a way to value even though they are not a PHYSICAL asset.