Goodwill that arises on the acquisition of subsidiaries is presented with intangible assets.
Goodwill is carried at cost less accumulated impairment losses and is not subject to amortisation, but rather tested annually for impairment or more frequently if events or changes in circumstances indicate a potential impairment.
For purposes of impairment testing, goodwill acquired in a business combination is allocated to each CGU, or group of CGUs, that is expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Patents, licenses, software and customer contracts are intangible assets with a finite useful life and are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets under development are stated at cost and not amortised. On completion of development, all assets included in assets under development are reclassified to the appropriate class of assets.
Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of the finite useful life assets from the date available for use. The amortisation method, useful lives and residual values are reviewed at each reporting date and adjusted where appropriate. The estimated useful lives of intangible assets with a finite useful life are:
| 2023 | 2022 | |
| Customer contracts | 16.3 and 16.4 years | 16.3 and 16.4 years |
|---|---|---|
| Patents and licenses | 1 to 25 years | 1 to 25 years |
| Software | 3 to 10 years |
Impairment testing is undertaken when circumstances indicate that the carrying amount may not be recoverable.
In allocating goodwill, the Cennergi group of companies has been identified as a single CGU to which the goodwill of R521 million has been allocated.
The Cennergi CGU was assessed for impairment as at 31 December 2023 and 31 December 2022 as a result of the requirement to test goodwill annually for impairment. There were no indicators of impairment for the Cennergi CGU during the reporting period. No impairment charge was required as the recoverable amount, determined using fair value less costs of disposal, exceeded the carrying amount on 31 December 2023.
The recoverable amount was derived using a DCF model which is a Level 3 valuation technique in terms of the fair value hierarchy. The valuation has been performed in South African rand using the following information:
The key assumptions made by management (expressed in nominal terms) and management's approach to determining these key assumptions is summarised as follows:
Management considered and assessed reasonably possible changes to the key assumptions and have not identified any instances that could cause the carrying amount of the Cennergi CGU to exceed its recoverable amount.
| Group | ||||||||
| At 31 December 2023 | Note |
Goodwill Rm |
Customer contracts Rm |
Patents
and licences Rm |
Software Rm |
Intangible assets under
development Rm |
Total Rm |
|
| Gross carrying amount | ||||||||
| At beginning of the year | 521 | 2 685 | 36 | 3 242 | ||||
| Transfer from property, plant and equipment | 10.1.3 | 930 | 24 | 954 | ||||
| Transfer between classes | 5 | (5) | ||||||
| At end of the year | 521 | 2 685 | 41 | 930 | 19 | 4 196 | ||
| Accumulated amortisation | ||||||||
| At beginning of the year | (451) | (31) | (482) | |||||
| Transfer from property, plant and equipment | 10.1.3 | (749) | (749) | |||||
| Charges for the year | 6.1.3 | (164) | (3) | (8) | (175) | |||
| At end of the year | (615) | (34) | (757) | (1 406) | ||||
| Net carrying amount at end of the year | 521 | 2 070 | 7 | 173 | 19 | 2 790 | ||
| Group | ||||||
| At 31 December 2022 | Note | Goodwill Rm |
Customer contracts Rm |
Patents and licences Rm |
Total Rm |
|
| Gross carrying amount | ||||||
| At beginning of the year | 521 | 2 685 | 38 | 3 244 | ||
| Disposal of subsidiary | (2) | (2) | ||||
| At end of the year | 521 | 2 685 | 36 | 3 242 | ||
| Accumulated amortisation | ||||||
| At beginning of the year | (287) | (30) | (317) | |||
| Charges for the year | 6.1.3 | (164) | (2) | (166) | ||
| Disposal of subsidiary | 1 | 1 | ||||
| At end of the year | (451) | (31) | (482) | |||
| Net carrying amount at end of the year | 521 | 2 234 | 5 | 2 760 | ||
| Company | ||||||
| At 31 December 2023 | Note |
Intangible assets under development Rm |
Software Rm |
Patents
and licences Rm |
Total Rm |
|
| Gross carrying amount | ||||||
| At beginning of the year | 22 | 22 | ||||
| Transfer from property, plant and equipment | 10.1.3 | 24 | 930 | 954 | ||
| Transfer between classes | (5) | 5 | ||||
| At end of the year | 19 | 930 | 27 | 976 | ||
| Accumulated amortisation | ||||||
| At beginning of the year | (20) | (20) | ||||
| Charges for the year | 6.1.3 | (8) | (2) | (10) | ||
| Transfer from property, plant and equipment | 10.1.3 | (749) | (749) | |||
| At end of the year | (757) | (22) | (779) | |||
| Net carrying amount at end of the year | 19 | 173 | 5 | 197 | ||
| Company | ||||
| At 31 December 2022 | Note | Patents and licences Rm |
Total Rm |
|
| Gross carrying amount | ||||
| At beginning of the year | 22 | 22 | ||
| At end of the year | 22 | 22 | ||
| Accumulated amortisation | ||||
| At beginning of the year | (18) | (18) | ||
| Charges for the year | 6.1.3 | (2) | (2) | |
| At end of the year | (20) | (20) | ||
| Net carrying amount at end of the year | 2 | 2 | ||
IR