AFRICAN DAWN ANNUAL REPORT 2017 Notes to the Financial Statements Annual Financial Statements For the year ended 28 February 2017 continued 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 17% 6% Compounded annual total operating costs increase % 2 -5% 5% Pre-taxation discount rate 32% 25% Recoverable amount of the CGU (R'000) 4,043 3,782 54 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 (excluding the carried interest relating to the Sales and Settlement Agreement for Knife Capital) 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 this reflects some restructurings and cost saving measures being implemented. With regard to Knife Capital • The recoverable amount calculated based on value in use did not exceed the carrying amount by R3,736 million(2016: R3,541 million). With regard to Grindstone • The recoverable amount calculated based on value in use exceeded the carrying amount by R2,839 million (2016: 4,452 million). With regard to Yuediligence • The recoverable amount calculated based on value was not included in the impairment of goodwill calculation as Yuediligence was developed after acquisition and was not part of the original goodwill calculation. Yuediligence is a product of the Gap Analysis assessment Tool that was productised into a separate entity.
AFRICAN DAWN 2017
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