NOTES TO THE GROUP FINANCIAL STATEMENTS

Note 1 - Significant accounting policies Note 2 - Revenue Note 3 - Profit before tax Note 4 - Directors' remuneration Note 5 - Share-based payments Note 6 - Tax Note 7 - Basic, headline and diluted earnings per share Note 8 - Dividends Note 9 - Intangible assets Note 10 - Property, plant and equipment Note 11 - Operating leases Note 12 - Participation in export partnerships Note 13 - Deferred tax assets Note 14 - Investment in associate Note 15 - Loans Note 16 - Inventory Note 17 - Trade and other receivables Note 18 - Net cash and cash equivalents Note 19 - Share capital Note 20 - Treasury shares Note 21 - Borrowings Note 22 - Retirement benefits Note 23 - Trade and other payables Note 24 - Provisions Note 25 - Commitments Note 26 - Operating segments Note 27 - Related party transactions Note 28 - Financial instruments Note 29 - Change in financial period cut
off date Note 30 - Non-controlling interest Note 31 - Early adoption and other reclassifications Note 32 - Accounting standards and interpretations to be adopted in future periods

Pick n Pay Group of Companies financial statements
Notes to the Group financial statements
for the period ended

      Pick n Pay Stores Group       Pick n Pay Holdings Group  
      Goodwill  
Rm  
 Systems  
develop-  
ment  
Rm  		 Licences  
Rm  		 Total  
Rm  		       Goodwill  
Rm  		 Systems  
develop-  
ment  
Rm  		 Licences  
Rm  		 Total  
Rm  		  
9.  
INTANGIBLE ASSETS  
                          
  2014                            
  Carrying value     291.2   635.2   61.2   987.6         291.2   635.2   61.2   987.6    
  Cost     312.1   1 297.7   109.8   1 719.6         312.1   1 297.7   109.8   1 719.6    
  Accumulated amortisation and impairment losses     (20.9)   (662.5)   (48.6)   (732.0)         (20.9)   (662.5)   (48.6)   (732.0)    
  Reconciliation of
carrying value  		                          
  Carrying value at beginning of period     233.5   642.1   72.3   947.9         233.5   642.1   72.3   947.9    
  Additions     —   280.2   9.0   289.2         —   280.2   9.0   289.2    
  Expansion of operations     —   246.2   9.0   255.2         —   246.2   9.0   255.2    
  Maintaining operations     —   34.0   —   34.0         —   34.0   —   34.0    
  Amortisation     —   (179.2)   (20.1)   (199.3)         —   (179.2)   (20.1)   (199.3)    
  Impairment     —   (104.1)   —   (104.1)         —   (104.1)   —   (104.1)    
  Disposals     —   (11.1)   —   (11.1)         —   (11.1)   —   (11.1)    
  Purchase of operations*     57.7   —   —   57.7         57.7   —   —   57.7    
  Foreign currency translation     —   0.4   —   0.4         —   0.4   —   0.4    
  Reclassifications from property, plant and equipment     —   6.9   —   6.9         —   6.9   —   6.9    
  Carrying value at end
of period  		   291.2   635.2   61.2   987.6         291.2   635.2   61.2   987.6    
  2013                            
  Carrying value     233.5   642.1   72.3   947.9         233.5   642.1   72.3   947.9    
  Cost     254.4   1 054.6   122.6   1 431.6         254.4   1 054.6   122.6   1 431.6    
  Accumulated amortisation and impairment losses     (20.9)   (412.5)   (50.3)   (483.7)         (20.9)   (412.5)   (50.3)   (483.7)    
  Reconciliation of
carrying value  		                          
  Carrying value at beginning of period     201.5   531.3   66.8   799.6         201.5   531.3   66.8   799.6    
  Additions     —   242.4   —   242.4         —   242.4   —   242.4    
  Expansion of operations     —   192.0   —   192.0         —   192.0   —   192.0    
  Maintaining operations     —   50.4   —   50.4         —   50.4   —   50.4    
  Amortisation     —   (128.9)   (16.9)   (145.8)         —   (128.9)   (16.9)   (145.8)    
  Disposals     —   (9.4)   —   (9.4)         —   (9.4)   —   (9.4)    
  Purchase of operations     32.0   —   9.8   41.8         32.0   —   9.8   41.8    
  Foreign currency translation     —   (0.9)   —   (0.9)         —   (0.9)   —   (0.9)    
  Reclassifications from property, plant and equipment     —   7.6   12.6   20.2         —   7.6   12.6   20.2    
  Carrying value at end of period     233.5   642.1   72.3   947.9         233.5   642.1   72.3   947.9    
 

Cash-generating units to which goodwill has been allocated have been identified as trading sites or clusters. The recoverable amount for each cash-generating unit was determined as value in use. The value in use was determined by discounting the cash flow forecasts for the cash-generating units at an appropriate pre-tax rate. Recoverable amounts of all cash-generating units were determined to be higher than their carrying values and therefore no impairment losses have been recognised.  
 

An impairment test on goodwill relating to the cash-generating unit trading as Boxer, with a carrying value of R106.4 million (2013: R106.4 million), was performed. The growth rate applied to cash flow forecasts were based on past performance and management’s expectations of the retail market within which this cash-generating unit trades. The pre-tax discount rate used reflected specific risks for this cash-generating unit. The recoverable amount was determined to be higher than the carrying value and therefore no impairment loss was recognised.  
 

During the year under review the Group completed the centralisation of its buying and operational and finance support functions. As a result systems and reporting tools previously developed to support the decentralised business operation became obsolete indicating that certain intangible assets had to be assessed for impairment. Management estimated the recoverable amount (calculated as the higher of the value in use and the fair value less costs to sell) of the related intangible assets as zero and an impairment of R104.1 million was recognised in the statement of comprehensive income in the current reporting period. This impairment, net of the related tax effect of R29.1 million, has been added back in the calculation of headline earnings, refer note 7.  
 

* The purchase of operations during the current and previous periods under review of R103.3 million and R118.3 million respectively relates to the purchase of various stores or the conversion of franchise stores to owned stores. None of the individual purchase transactions were material for the Group. Refer to note 10 and note 16 for purchases of related property, plant and equipment and inventory.