Notes to the Financial Statements continued AFRICAN DAWN 71 ANNUAL REPORT 2015 2015 Cost Accumulated impairment Carrying amount 4. Goodwill Group Goodwill 8,076 - 8,076 Reconciliation of goodwill - Group - 2015 Opening balance Additions through business combinations Closing balance Goodwill - 8,076 8,076 Goodwill impairment Impairment test for goodwill During 2015, goodwill of R8 076 000 arose on the acquisition of the Knife Capital Group (refer to note 37) and has been allocated to the cash-generating units (CGUs) as follows: Opening Additions Disposals Impairment Closing Knife Capital - 7,133 - - 7,133 Grindstone - 943 - - 943 - 8,076 - - 8,076 The recoverable amount of the CGUs has been determined based on value-in-use calculations. These calculations use pre- tax cash flow projections based on financial budgets approved by management covering a six-year period in line with the carried interest cycle. Cash flows beyond the six-year period are extrapolated using the estimated growth rates stated below: The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. The key assumptions, long term growth rates and discount rates used in the value-in-use calculations are as follows: Assumptions Note Knife Capital Grindstone Compounded annual revenue increase % 1 14% 11% Compounded annual total operating costs increase % 2 8% 7% Pre-taxation discount rate 20% 20% Recoverable amount of the CGU (R'000) 17,622 2,931 Notes These assumptions have been used for the analysis of each CGU within the Knife Capital Group: 1. Revenue increase is based on past performance and management’s expectations of growth. 2. Operating costs are the fixed costs of the CGUs, which do not vary significantly with sales volumes or prices. Management forecasts these costs based on the current structure of the business, adjusting for inflationary increases and these do not reflect any future restructurings or cost saving measures.
AFRICAN DAWN 2015 Annual Report
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