Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:

Impairment of Sapling Trade and Invest (Proprietary) Limited

As part of the purchase price allocation of the Sapling Trade and Invest (Proprietary) Limited transaction in September 2012, the Group identified the following intangible assets:

However, during the course of the year the sole income generating contract with the primary client was prematurely terminated resulting in no foreseeable future income.

This has resulted in the full impairment of the contractual customer relationship intangible asset (R17.52 million) and goodwill (R23.1 million).

The incorporation of Klinikka (Proprietary) Limited and the related business combination of DBC SA (Proprietary) Limited

During the year AHL incorporated Klinikka (Proprietary) Limited (“Klinnika”) to commence a new business operation of selling specialised medical equipment. The formation of Klinikka resulted in the business acquisition of assets of DBC SA (Proprietary) Limited.

As part of the purchase price allocation of the transaction in November 2013, the Group recognised goodwill and a master licence agreement giving AHL the sole right to sell the specialised equipment in South Africa and other parts of the world.

Acquisition of Bonitas Marketing Company (Proprietary) Limited

As part of the purchase price allocation of the Bonitas Marketing Company (Proprietary) Limited transaction in September 2012, the Group identified the following intangible assets:

Contractual customer relationships

The existing customer contracts with external parties will result in an inflow of economic benefits to the Group and as a result considered to be an intangible asset.

The discounted cash flow technique was used to value the customer contracts at the date of acquisition. Operating profits before tax based on five year income and expenditure forecasts derived from management’s strategic planning forecasts were used as cash flows. A discount rate of 10.65% was used, which was considered to be appropriate for the industry in which Bonitas Marketing Company (Proprietary) Limited operated at the date of acquisition. The useful life of this intangible asset has been estimated to be five years.

Contingencies

By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgement and estimates of the outcome of future events as disclosed in note 38.1.

Impairment of goodwill

The carrying amount of goodwill is tested annually for impairment in accordance with the stated accounting policy. The recoverable amount of the cash-generating units (“CGU”) has been determined based on value-in-use calculation, being the net present value of the discounted cash flows of the CGU less the tangible net asset value of that CGU. Details of the main assumptions applied in determining the net present value of the CGU are provided in note 8 in these annual financial statements.

Carrying value of tangible and intangible assets

The Group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of tangible assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors.

The carrying amount of tangible and intangible assets at 30 June 2014 was R115.1 million (June 2013: R105.3 million) and R603 million (June 2013: R628 million) respectively.