Goodwill

“What the balance sheet cannot record is often what determines whether the balance sheet endures.”

The time has come to confront a question that accounting standards have postponed for too long: when will governance be recognised as part of goodwill? Not as commentary, not as disclosure, but as an asset that carries economic weight and shapes the destiny of every enterprise.

Today goodwill captures reputation, brand presence, customer loyalty, and the promise of future earnings. It accounts for names like Hermès, Toyota, Rolex, and Unilever, where intangible value far exceeds tangible assets. Yet the architecture that sustains these reputations remains invisible.

Governance is the structure that protects brand integrity, continuity of leadership, and coherence of purpose. It is the silent scaffold on which all other intangibles rest.

The absence of governance from goodwill is no longer a technical omission. It is a conceptual one. A growing number of collapses reveal that enterprises fail not because their products weaken, but because their governance fractures. Boards lose coherence. Families lose alignment. Leaders lose legitimacy.

What auditors call goodwill impairment is often the financial shadow of a governance failure that was never recognised.

Investors now sense this before the standards do. Banks evaluate governance as they once evaluated liquidity. They observe clarity of authority, maturity of succession, discipline of decision making, and the capacity to manage conflict with dignity.

These elements are not abstract. They shape credit pricing, risk appetite, and long term resilience.

Governance influences value with the same force as brand strength, product quality, or market share.

If goodwill is meant to represent the ability of an enterprise to generate future benefits, then governance is its most reliable predictor. A brand cannot survive inconsistent leadership. A strategy cannot endure when authority is disputed. A family enterprise cannot maintain value when its internal order collapses.

The quality of governance determines whether the enterprise can absorb shocks or be defined by them.

Recognising governance within goodwill would not stretch accounting logic. It would complete it. It would acknowledge that continuity depends on more than assets and liabilities. It depends on how decisions are made, how purpose is interpreted, and how the organisation preserves coherence under pressure.

It depends on discipline in both structure and meaning.

The question is no longer whether governance is measurable.

The question is whether we can afford a system that refuses to measure it.

W.