Notes to the financial statements | Note 5.2

5. Long-term assets
5.2 Intangible assets
 

Significant accounting judgements, estimates and assumptions

Estimation of useful lives and residual values for intangible assets

The useful lives of assets are based on management's estimation. Management considers the impact of changes in technology, customer service requirements and availability of capital funding to determine the optimum useful life expectation for each of the individual categories of intangible assets. Due to the rapid technological advancement in the telecommunications industry, the estimation of useful lives could differ significantly on an annual basis due to unexpected changes in the rollout strategy. The measurement of residual values of assets is also based on management's judgement whether the assets will be sold or used to the end of their economic lives and the estimation of what their condition will be like at that time. Changes in the useful lives and/or residual values are accounted for as a change in accounting estimate.

Impairments of intangible assets

Management is required to make judgements concerning the cause as well as the amount of impairment. In the identification of impairment indicators, management considers the impact of changes in current competitive conditions, cost of capital, availability of funding, technological obsolescence, discontinuance of services, market changes, legal changes, operating environments and other circumstances that could indicate that an impairment exists. The Group applies the impairment assessment to its cash-generating units. This requires management to make significant judgements concerning the existence of impairment indicators, identifying cash-generating units, and estimating the remaining useful lives of assets as well as projected cash flows to determine fair value less costs of disposal or value in use. Management's analysis of cash-generating units involves an assessment of the ability of a group of assets to independently generate cash inflows, and involves analysing the extent to which different products make use of the same assets. Management's judgement is also required when assessing whether there are indicators that a previously recognised impairment loss should be reversed.

Where impairment indicators exist, the determination of the recoverable amount of a cash-generating unit requires management to make assumptions to determine the value in use. Value in use is calculated using the discounted cash flow valuation method. The determination of value in use is based on a number of factors which include the discount rate, revenue growth, terminal growth rates, EBITDA margins and capital expenditure. The judgements, assumptions and methodologies used can have a material impact on the recoverable amount and ultimately the amount of impairment loss recognised.

In calculating value in use, consideration is also given to the completion of a network that is still partially completed at the date of performing the impairment test. Significant judgement is applied in determining if network expansion should be treated as the completion of a partially completed asset or the enhancement of an asset (which cash flows are not allowed to be considered in calculation of value in use).

Summary of material accounting policies

Initial recognition and measurement

At initial recognition, acquired intangible assets are recognised at their purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. The recognised cost includes any directly attributable costs for preparing the asset for its intended use. Internally generated intangible assets are recognised at cost comprising all directly attributable costs necessary to create and prepare the asset to be capable of operating in the manner intended by management.

Intangible assets under construction represent application and other non-integral software and include all direct expenditure as well as related borrowing costs capitalised, but exclude the costs of abnormal amounts of waste material, labour or other resources incurred in the production of self-constructed assets.

Subsequent measurement

After initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Repairs and maintenance expenses are charged to profit or loss during the reporting period in which they are incurred.

Subsequent costs in respect of intangible assets already functioning as intended by management are capitalised, provided that they meet the definition of an asset (e.g. relate to additional features and enhancements that result in additional future economic benefits).

Amortisation, residual values and useful lives

The residual value of intangible assets is the estimated amount that the Group would currently obtain from the disposal of the asset, after deducting the estimated cost of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. Due to the nature of the asset, the residual value is assumed to be zero unless there is a commitment by a third party to purchase the asset at the end of its useful life or when there is an active market that is likely to exist at the end of the asset's useful life, which can be used to estimate the residual values. The residual values of intangible assets, the amortisation methods used, and their useful lives are reviewed on an annual basis at reporting date and adjusted prospectively as required.

Amortisation commences when the intangible assets are available for their intended use and is recognised on a straight-line basis over the assets' expected useful lives. Amortisation ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised.

The expected useful lives applied are provided in note 3.4.9.

Impairment of intangible assets (including goodwill)

The Group regularly reviews its non-financial assets and cash-generating units for any indication of impairment. An impairment test is performed when indicators, including changes in technology, market, economic, legal and operating environments, availability of funding or discontinuance of services occur and could result in changes to the asset's or cash-generating unit's estimated recoverable amount. Goodwill, intangible assets with indefinite useful lives and intangible assets under construction are tested for impairment annually regardless of whether an indicator of impairment has been identified.

An impairment loss is recognised in profit or loss if the carrying amount of an asset or a CGU exceeds its estimated recoverable amount. Previously recognised impairment losses, other than goodwill, are reviewed annually for any indication that they may no longer exist or may have decreased. If any such indication exists, the recoverable amount of the asset is estimated. Such impairment losses are reversed in profit or loss if the recoverable amount has increased as a result of a change in the estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount that would have been determined (net of amortisation) had no impairment loss been recognised in prior years.

   2024  2023 
Group  Cost
Rm 		 Accumulated
amortisation,
impairment
and
write-offs
Rm 		 Carrying
value
Rm 		 Cost
Rm 		 Accumulated
amortisation
and
write-offs
Rm 		 Carrying
value
Rm 
Goodwill  1 367  (72) 1 295  1 367  (72) 1 295 
Trademarks, copyrights and other  2 551  (535) 2 016  1 621  (426) 1 195 
Software  13 133  (11 371) 1 762  12 756  (11 060) 1 696 
Under construction  262  (8) 254  315  (8) 307 
   17 313  (11 986) 5 327  16 059  (11 566) 4 493 
Company                   
Trademarks, copyrights and other  2 118  (155) 1 963  1 146  (47) 1 099 
Software  9 519  (8 416) 1 103  9 390  (8 242) 1 148 
Under construction  75  –  75  95  –  95 
   11 712  (8 571) 3 141  10 631  (8 289) 2 342 

The carrying amounts of intangible assets can be reconciled as follows:

   Group 
2024  Carrying 
value at the 
beginning 
of the year 
Rm 		 Additions 
Rm 		 Transfers 
Rm 		 Disposals 
Rm 		 Amortisation1
Rm 		 Write-offs 
Rm 		 Reclassified 
to held 
for sale2
Rm 		 Carrying 
value at 
the end of 
the year 
Rm 
Goodwill  1 295  –  –  –  –  –  –  1 295 
Trademarks, copyrights and other  1 195  972  –  –  (150) (1) –  2 016 
Software  1 696  319  260  –  (485) (17) (11) 1 762 
Under construction  307  134  (184) (2) –  –  (1) 254 
   4 493  1 425  76  (2) (635) (18) (12) 5 327 
2023  Carrying
value at the
beginning of
the year
Rm 		 Additions
Rm 		 Business
combination
Rm 		 Transfers
Rm 		 Disposals
Rm 		 Amortisation1
Rm 		 Write-offs
Rm 		 Write-offs
and
impairment
reversals
Rm 		 Carrying
value at
the end of
the year
Rm 
Goodwill  1 259  –  99  –  –  –  (63) –  1 295 
Trademarks, copyrights and other  122  1 142  38  29  (38) (81) (17) –  1 195 
Software  2 478  496  –  340  1  (665) (934) (20) 1 696 
Under construction  389  245  –  (316) (13) –  –  2  307 
   4 248  1 883  137  53  (50) (746) (1 014) (18) 4 493 
1 Included in the amortisation is R3 million (31 March 2023: Rnil) relating to Swiftnet. Refer to note 12.2.
2 Refer to note 12.2.

The carrying amounts of intangible assets can be reconciled as follows:

   Company 
2024  Carrying 
value at the 
beginning of 
the year 
Rm 		 Additions 
Rm 		 Transfers 
Rm 		 Amortisation 
Rm 		 Write-offs 
Rm 		 Carrying 
value at the 
end of the 
year 
Rm 
Trademarks, copyrights and other  1 099  971  1  (108) –  1 963 
Software  1 148  232  62  (319) (20) 1 103 
Under construction  95  44  (64) –  –  75 
   2 342  1 247  (1) (427) (20) 3 141 
2023  Carrying
value at the
beginning
of the year
Rm		 Additions
Rm 		 Transfers
Rm 		 Disposals
Rm 		 Amortisation
Rm 		 Impairment
Rm 		 Write-offs
Rm 		 Carrying
value at the
end of the
year
Rm 
Trademarks, copyrights and                         
other  1  1 141  –  –  (43) –  –  1 099 
Software  2 328  451  78  (375) (534) (785) (15) 1 148 
Under construction  97  81  (56) (25) –  –  (2) 95 
   2 426  1 673  22  (400) (577) (785) (17) 2 342 

The goodwill in Group is attributable to goodwill that arose on acquisition of BCX in August 2015 and subsequent acquisitions made by BCX and BCX's acquisition of Dotcom Software Solutions (Pty) Ltd in December 2022.

Intangible assets that are material to the Group consist of software, trademarks and other, whose average remaining amortisation period is two years (31 March 2023: two years).

No other intangible asset apart from goodwill has been assessed as having an indefinite useful life.

Intangible assets under construction are included for testing in the impairment testing for the Telkom, BCX and Openserve CGUs.

Approximately R1 098 million (31 March 2023: R1 328 million) and R1 010 million (31 March 2023: R1 176 million) of additions relate to externally acquired intangible assets for the Group and the Company, respectively, while R324 million (31 March 2023: R506 million) relates to internal developments for the Group and R237 million (31 March 2023: R461 million) relates to internal developments for the Company. Additions of R3 million for Group relate to Swiftnet additions which is classified as held for sale.

Changes to the estimated useful lives of intangible assets resulted in a decrease in amortisation to the value of R2 million (31 March 2023: R128 million) for the Company and R8 million (31 March 2023: 132 million) for the Group. Refer to note 3.4.9 for the useful lives.

Where assets have become technologically obsolete or can no longer contribute towards the Group and Company's revenue-generating capacity, the assets are written off. The total write-off balance is not considered significant to the financial statements as a whole in the current or prior financial years.