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Hyprop Investments Limited
Group annual financial statements 2016
GROUP
June 2016
R000
GROUP
June 2015
R000
9.
Goodwill
Cost
Balance at 1 July
29 566
29 566
Acquisition of business
18 134
Balance at 30 June
47 700
29 566
Accumulated impairment
Balance at 1 July
(29 566)
(25 286)
Impairment of goodwill
(4 280)
Balance at 30 June
(29 566)
(29 566)
Carrying value at end of the year
18 134
Goodwill by region and segment
Investment property – sub-Saharan Africa (excluding SA)
Ikeja City Mall (Lagos, Nigeria)
18 134
Carrying value at end of the year
18 134
Impairments/reversal of impairments
The group reviews the carrying amounts of cash-generating units (CGU) to which goodwill has been allocated for impairment at each
reporting date. A review may be triggered during the financial year if indicators of impairment (suggesting that the carrying amount may be
greater than the recoverable amount) are observed in the ordinary course of business.
Once an impairment has been recognised, no reversal of a previous impairment is processed in subsequent periods, even if the prospects of
the impaired CGU improve.
Value-in-use calculations
The recoverable amount is determined based on the CGU’s value-in-use by using the discounted cash flow method over three years. Key
assumptions relating to this valuation include the discount rate and cash flows used to determine the value-in-use.
Cash flows
Future cash flows are estimated based on local currency financial budgets approved by management, covering a three-year period and are
extrapolated over the useful life of the assets, to reflect the long-term plans for the group, using an estimated growth rate for the asset. The
estimated future cash flows and discount rates used are post-tax, based on an assessment of the current risks applicable to the asset and
country in which it operates.
Discount rate
The weighted average cost of capital (WACC) is derived from a pricing model based on credit risk and the cost of the debt. The variables used
in the model are established on the basis of management judgement and current market conditions. Management judgement is also applied
in estimating the future cash flows of the CGU.
Impairments – 2016
During 2016, Hyprop acquired Ikeja City Mall in Lagos, Nigeria, and allocated USD1,3 million of goodwill. Management paid the additional amount
due to an expectation of an increase in value of the property. Subsequent to the acquisition, the property was revalued at 30 June 2016 and
increased in value by USD2,7 million (75% – USD2,0 million) confirming management’s initial assessment.
Refer to note 33 – Business combinations
and transactions with subsidiary
.
Based on the valuation at 30 June 2016, management did not recognise an impairment for goodwill in 2016. For detailed assumptions and
valuation techniques used,
refer to note 2 – Investment property
.