Goodwill is allocated for impairment testing purposes to the following cash-generating units:

Goodwill is allocated to the appropriate CGUs according to the type of business and where it operates. External and internal factors surrounding the business operations play a role in determining an indication of impairment. In addition, the carrying amount of goodwill is subject to an annual impairment test.

Impairment of goodwill arises when the recoverable amount of the CGU, including goodwill, is less than the carrying value. The recoverable amount is determined as the greater of the fair value less costs to sell or the value in use. In most instances it is difficult to use the fair value less costs to sell, as a reliable estimate is not easily obtainable in determining the recoverable amount. Therefore the value-in-use method is used to assess the goodwill for impairment.

The key assumptions used in the value in use calculation for the CGUs shown above are as follows:

A discounted cash flow valuation model is applied using a five-year strategic plan as approved by management. The financial plans are the quantification of strategies derived from the use of a common strategic planning process followed across the group. The process ensures that all significant risks and sensitivities are appropriately considered and factored into strategic plans.

The discount rate applied to the forecast period, has been outlined for each cash generating unit in the table below. Discount rates applied to cash flow projections are based on a country or region-specific discount rate, dependent upon the location of cash-generating segment operations.

The pre-tax nominal discount rates applied are as follows:

Long-term growth rates applied to extrapolate cash flows are as follows:

Other key assumptions applied:

Inflation rate and GDP growth rate forecasts

Forecast consumer price indices and real GDP growth during the forecast period for the countries from which revenue is derived, expenses are incurred, and inventory is purchased are consistent with external sources and shown below:

Exchange rate forecasts

Exchange rates applied over the forecast period are consistent with external sources and shown below:

The impairments relate to the following cash-generating units:

The 2015 impairment loss pertaining to Logistics Sea Air Middle East and Germany was based on fair value less cost to sell, which was based on the contractually agreed price less costs to exit. The Sea Air component of the cash-generating unit was sold for €1, and as such, the entire amount of goodwill was impaired within the business. The level of fair value hierarchy applied by Barloworld was level 3, in line with the group descriptions outlined in note 31.1.2.

The 2014 impairment loss pertaining to Logistics Sea Air Middle East and Germany was based on the value in use. These impairments were processed mainly due to lower key customer volumes.

The 2013 impairment losses pertaining to Motor Australia and Handling Holland related to held for sale businesses that were in the process of being disposed of and which were subsequently disposed of post-year end. The impairment of these amounts was based on the fair values less costs to sell of those businesses in terms of the negotiations which were at an advanced stage at the year end. The level of fair value hierarchy applied by Barloworld was level 3, in line with the group descriptions outlined in note 31.1.2.