s
NOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS l NOTE 5
    Goodwill
Rm		   Computer
software
Rm		   Customer
lists and
contracts
Rm		   Other
intangibles
Rm		   Total
Rm		  
5. Goodwill and intangible assets                      
  At 30 June 2013                      
  Cost 4 747   497   1 509   124   6 877    
  Accumulated amortisation and impairment 821   341   454   55   1 671    
    3 926   156   1 055   69   5 206    
  Net book value at beginning of year 3 238   95   799   102   4 234    
  Net acquisition of subsidiaries and businesses 331   9   288   20   648    
  Additions     105   7   4   116    
  Proceeds on disposal     (7)           (7)    
  Impairment charge (139)   (2)   (1)       (142)    
  Amortisation     (56)   (257)   (6)   (319)    
  Profit on disposal     3           3    
  Reclassification     1   50   (51)        
  Currency adjustments 496   9   169       674    
  Reclassification to assets classified as held for sale     (1)           (1)    
  Net book value at end of year 3 926   156   1 055   69   5 206    
  At 30 June 2012                      
  Cost 3 920   385   942   145   5 392    
  Accumulated amortisation and impairment 682   290   143   43   1 158    
    3 238   95   799   102   4 234    
  Net book value at beginning of year 1 603   63   84   73   1 823    
  Net acquisition of subsidiaries and businesses 1 751   6   852   14   2 623    
  Additions     60       24   84    
  Proceeds on disposal     (1)           (1)    
  Impairment charge (123)               (123)    
  Amortisation     (40)   (128)   (8)   (176)    
  Reclassification     5           5    
  Currency adjustments 7   2   (9)   (1)   (1)    
  Net book value at end of year 3 238   95   799   102   4 234    
  Expenditure on acquired patents, trademarks, licences, customer lists and computer software is amortised on a straight-line basis over the assets estimated useful lives between 2 to 10 years. Goodwill is not amortised.
  Significant cash-generating units (CGUs) Goodwill
carrying
amount
2013
Rm		   Discount
rate applied
to cash flow
2013
%		   Discount
rate applied
to cash flow
2012
%		   Growth rate
used to
extrapolate
cash flows
%		  
  Africa Logistics (Including South Africa)                  
  CIC Holdings Limited 468   10,36   9,21   2    
  Imperial Health Sciences (previously RTT Health Sciences) 194   10,36       2    
  International Logistics                  
  Panopa Group 438   8,96   9,37   1,5    
  Neska Group 131   8,96   9,37   1,5    
  Reederei Group 682   8,96   9,37   1,5    
  Lehnkering Group 967   8,96   9,37   1,5    
  Lubcke Marine 52   8,96   9,37   1,5    
  Rijnaarde BV 78   8,96   9,37   1,5    
  Distribution, Retail and Allied Services                  
  Uvundlu Investments (Pty) Ltd 56   9,30   9,50   5    
  E-Z-Go Golf Carts 55   9,85   11,00   2    
  Automotive Retail                  
  Beekman Super Canopies (Pty) Ltd 76   9,30   9,84   2    
  Orwell Trucks Limited 52   9,30       2    
  Other Segments                  
  Midas Group (Pty) Ltd 202   9,30   9,99   2    
  Significant CGUs 3 451                
  Other CGUs 475                
    3 926                
  Goodwill impairment testing

Goodwill is allocated to the appropriate CGUs according to the type of business and where it operates. The CGUs represent the identifiable assets for which an active market exists and which generate independent cash flows for the group.

External and internal factors surrounding the business operations play a role in determining an indication of impairment. In addition, the carrying amount of goodwill is subject to an annual impairment test. Impairment tests are carried out on all goodwill balances within each CGU.

Impairment of goodwill arises when the recoverable amount of the CGU, including goodwill, is less than the carrying value. The recoverable amount is determined as the greater of the fair value less costs to sell or the value in use. In most instances it is difficult to use the fair value less costs to sell as a reliable estimate is not easily obtainable in determining the recoverable amount. Therefore the value-in-use method is used to assess the goodwill for impairment.

Basis for value in use calculations

Cash flow projections

The value in use is calculated using the forecasted cash inflows and outflows which are expected to be derived from continuing use of the CGU and its ultimate disposal. Cash flow projections for financial forecasts are based on expected revenue, operating margins, working capital requirements and capital expenditure, which are approved by senior management. The assumptions used in deriving at the cash flows are based on past experience and adjusted for any expected changes for the individual CGUs.

These cash flow projections cover a five-year forecast period, which are then extrapolated into perpetuity using applicable growth rates. Growth rates applied are determined based on future trends within the industry, geographic location and past experience within the operating divisions. Growth rates can fluctuate from year to year based on the assumptions used to determine these rates.

Discount rate applied

The discount rate applied to the cash flow projections is calculated using the weighted average cost of capital which is adjusted for risk and is applied to calculate the present value of the forecasted cash flows.

Goodwill impairments

During the current year the group impaired goodwill amounting to R139 million in the following segments:

– Africa (Including South Africa) Logistics – R107 million of goodwill was impaired as a result of contracts lost, warranty profits not being achieved and CGUs not making sufficient profits.
– Other Segments – R32 million of goodwill relating to warranty profits not being achieved and the recoverability of goodwill relating to the businesses being sold.