Goodwill is a key accounting concept representing the excess value of a company beyond the fair value of its tangible assets and liabilities. It arises typically in the context of mergers and acquisitions, where the acquired business is valued higher due to intangible factors such as a strong customer base, good reputation, trademarks, or advanced proprietary technologies.

For example, if Company A purchases Company B for $5 million, and Company B's tangible net assets are valued at $3 million, the $2 million difference is recorded as goodwill on the balance sheet. Goodwill does not directly generate revenue but reflects underlying business strengths that can lead to future income.

It's an intangible asset and is tested for impairment periodically to ensure the recorded value aligns with its market reality. Impaired goodwill might indicate a decrease in the expected benefits from the underlying intangible factors. Examples where 'goodwill' is used include statements like, 'The goodwill resulting from the acquisition significantly enhanced the company's market presence.'