AFRICAN DAWN ANNUAL REPORT 2018 Notes to the Financial Statements continued Annual Financial Statements For the year ended 28 February 2018 59 Testing for impairment The investments in subsidiaries are tested for impairment by analysing each investment's recoverable amount when there is an indication of impairment. The recoverable amount of the investments 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 five-year period . Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. This growth rate does not exceed the long-term average growth rate in which the businesses operates in. The key assumptions, long term growth rates and discount rates used in the value-in-use calculations are as follows: Assumptions YueDiligence Elite Compounded annual revenue increase % 6% 6% Compounded annual total operating costs increase % 6% 5% Pre-taxation discount rate 38.13% 19.7% Testing for impairment 2018 The carrying value of YueDiligence was impaired by R1, 177million after the management forecast was adjusted downwards and the terminal period was reduced from 10 years to 5 years as the investment is a start-up and has a lack of proven history. This risk is however limited as the entities business is a spin-off of a succesful Gap Analysis service offered by Knife Capital. YueDiligence was also impaired at interim by R 498 000 as the Group lost 15% of the equity control of YueDiligence to acquire control of SME Snapshot. Refer Note 11. The recoverable amount of Elite was higher than the carrying value and therefore did not result in an impairment. 7. Deferred tax Asset/Deferred tax liability 2018 R’000 2017 R’000 2018 R’000 2017 R’000 Deferred tax liability - intangible asset on acquisition of Knife Capital - (753) - - Deferred tax liability – prepaid expenses - (5) Deferred tax assets 26 697 Net deferred tax asset/(liability) 26 (61) - - At beginning of year (61) (744) - - Assessed loss raised/(utilized) during the year against current income tax - 431 - - Deferred tax effect of amortisation of intangible asset raised on Knife Capital (refer to Note 5) 191 370 - - Disposal of Knife Capital (refer to Note 12) (111) Temporary difference trade debtors bad debt allowance - (137) - - Temporary difference on leave pay accrual 5 8 - - Temporary difference on deferred income - 11 - - 26 (61) - -
AFRICAN DAWN 2018 Annual Report
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