Here's an interesting story from my investments class this evening. One of the companies we were looking at was Griffin Corp. (GFF); their balance sheet had goodwill listed for 2004 to 2006, but had zero goodwill in 2007 and 2008. Goodwill is the difference between what you acquire the firm for and the book value of the company; if you buy a company for $3 billion and their net worth on the books is only $2.1 billion, the $900m difference will show up as goodwill.
Often times, companies will overpay for companies that they acquire. A certain amount of goodwill is understandable, as firms are often worth more (and should be worth more) than their physical assets less their liabilities. However, a large dose of goodwill can mean people may have overpaid for their acquisitions and may be dicey buys.
Griffin had a mysterious "other long term assets" entry on the MS Money version of the balance sheet show up in 2007 and 2008. Was that goodwill under a different name?
Yes, indeed. When you look at the balance sheet on their 10-K annual report for 2008, you get an entry for "COSTS IN EXCESS OF FAIR VALUE OF NET ASSETS OF BUSINESSES ACQUIRED." That's spelled g-o-o-d-w-i-l-l, folks. Somehow, the folks (or computer) at MSN Money missed that euphemism.
Griffon's accountants seem to be covering your assets so that the fact that you overpaid for something isn't as easy to see.