| 5. | Long-term assets | ||||||||||||
| 5.3 | Impairment of goodwill and cash-generating units | ||||||||||||
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Significant accounting judgements, estimates and assumptions CGU impairment assessment In determining the recoverable amount of the Group's CGUs, the Group considered several sources of estimation uncertainty and made certain assumptions or judgements about the future. Management uses the cash flow projections based on the Board-approved business plans. These cash flow projections are based on a five-year outlook for the current year-end. Management applied the following key assumptions in the discounted cash flow valuation model:
Summary of material accounting policies Measurement Goodwill impairment assessment Goodwill is measured as an excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net fair value of the acquiree's identifiable net assets. If the Group's interest in the fair value of the acquiree's identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer's previously held equity interest in the acquiree, the excess is recognised immediately in profit or loss as a bargain purchase gain. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of profit or loss on disposal.
Impairment considerations The Group tests impairment at a CGU level. As a right-of-use (ROU) asset does not generate cash inflows largely independent from other assets, the ROU asset is tested for impairment together with the CGU to which the asset belongs. From an IFRS 16 perspective, the assumptions assume the reinvestment of the ROU asset, i.e. cash flows to replace the ROU asset have been included in the model. Management adjusted the value in use model by excluding the cash outflows in respect of the lease payments as they relate to financing and including the cash outflows to replace the ROU asset. The Group's CGUs consist of Telkom Consumer, Openserve and BCX. BCX is the only CGU that has goodwill. In accordance with IAS 36 (Impairment of Assets), management has performed an annual impairment assessment of the CGUs as of 31 March 2026. Management identified impairment indicators for the Telkom Consumer, Openserve and BCX CGUs, with further details noted below. The Group utilised value in use, using the discounted cash flow method, as the valuation basis for all CGUs. Based on this, the income approach was applied. A five-year period was used for the discounted cash flows, which was approved by senior management and/or the Board of the Group. The CGUs were valued using a sum-of-the-parts approach. The valuation was performed on an enterprise value basis. BCX CGU Impairment on the BCX CGU is performed annually to fulfil the requirements of IAS 36 since the CGU has goodwill amounting to R1 295 million. The BCX CGU was valued using a sum-of-the-parts approach. The valuation was performed on an enterprise value basis. The value in use calculation took into consideration the following key assumptions: EBITDA margin Growth rates Terminal growth rates Discount rate The pre-tax discount rate for the BCX CGU is 15.0% (31 March 2025: 20.8%). An in-perpetuity calculation was also included after five years as per the terminal growth rate disclosure. Based on the value in use calculation and economic risk resulting from the global energy shock due to geopolitical conflict and budget assumption, as at 31 March 2026, there is no impairment loss. Sensitivity to changes in assumptions Telkom Consumer CGU Telkom Consumer operates in South Africa, where the economic climate is under strain due to numerous factors. Telkom Consumer's business is dependent on technology, and in some of its operations, the legacy assets (old technology) are still being utilised. The value in use calculation took into consideration the following key assumptions: EBITDA margin Growth rates Terminal growth rates Discount rate Based on the value in use calculation and economic risk resulting from the global energy shock due to geopolitical conflict and budget assumption, as at 31 March 2026, there is no impairment and no impairment reversal. Sensitivity to changes in assumptions
Openserve CGU Openserve operates in South Africa, where the economic climate is under strain due to numerous factors. Openserve's business is dependent on technology, and in some of its operations the legacy assets (old technology) are still being utilised. The value in use calculation took into consideration the following key assumptions: EBITDA margin Growth rates Terminal growth rates Discount rate Based on the value in use calculation and economic risk resulting from the global energy shock due to geopolitical conflict and budget assumption, as at 31 March 2026, there is no impairment and no impairment reversal. Sensitivity to changes in assumptions
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