Cite as: 518 U. S. 839 (1996)
Opinion of Souter, J.
over the fair value of all identifiable assets acquired as an intangible asset called "goodwill." Id., ¶ 11, p. 284; Kay & Searfoss, supra, at 23-38.4 In the ordinary case, the recognition of goodwill as an asset makes sense: a rational purchaser in a free market, after all, would not pay a price for a business in excess of the value of that business's assets unless there actually were some intangible "going concern" value that made up the difference. See Lowy 39.5 For that reason, the purchase method is frequently used to account for acquisitions, see A. Phillips, J. Butler, G. Thompson, & R. Whitman, Basic Accounting for Lawyers 121 (4th ed. 1988), and GAAP expressly contemplated its application to at least some transactions involving savings and loans. See Financial Accounting Standards Board Interpretation No. 9 (Feb. 1976). Goodwill recognized under the purchase method as the result of an FSLIC-sponsored supervisory merger was generally referred to as "supervisory goodwill."
Recognition of goodwill under the purchase method was essential to supervisory merger transactions of the type at issue in this case. Because FSLIC had insufficient funds to
4 See also Accounting Principles Board Opinion No. 17, ¶ 26, p. 339 (1970) (providing that "[i]ntangible assets acquired . . . as part of an acquired company should . . . be recorded at cost," which for unidentifiable intangible assets like goodwill is "measured by the difference between the cost of the . . . enterprise acquired and the sum of the assigned costs of individual tangible and identifiable intangible assets acquired less liabilities assumed").
5 See Newark Morning Ledger Co. v. United States, 507 U. S. 546, 556 (1993) (describing "goodwill" as "the total of all the imponderable qualities that attract customers to the business"). Justice Story defined "goodwill" somewhat more elaborately as "the advantage or benefit, which is acquired by an establishment, beyond the mere value of the capital, stock, funds, or property employed therein, in consequence of the general public patronage and encouragement, which it receives from constant or habitual customers, on account of its local position, or common celebrity, or reputation for skill or affluence, or punctuality, or from other accidental circumstances, or necessities, or even from ancient partialities, or prejudices." J. Story, Law of Partnership § 99, p. 139 (1841).
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