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. Notable, the goodwill acquired in the Equipment Mongolia business on 1 September 2020 has not been tested for impairment and will be subject to impairment testing for the first time in the 2021 financial year.

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.

With the outbreak of the COVID-19 global pandemic, the resulting global economic downturn and the credit rating downgrade of South Africa to sub-investment grade all goodwill was assessed for impairment at 31 March 2020 which resulted in the below mentioned impairments with the exception of Global Solutions which was impaired in the six months to the year ended 30 September 2020.

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.

With the outbreak of the COVID-19 global pandemic, the resulting global economic downturn and the credit rating downgrade of South Africa to sub-investment grade all goodwill was assessed for impairment which resulted in the below mentioned impairments for the year ended 30 September 2020.

note 1: Avis Rent a Car southern Africa: Impairment recognised for the current year.

In South Africa, as a result of the initial lockdown announced by President Ramaphosa, all non-essential operations (dealerships, stores, head offices and distribution centres) were closed from 27 March 2020 until 12 May 2020. The automotive industry was allowed to return to trading in a phased approach between May and June 2020. As the economy transitioned to level 3 lockdown with dealerships allowed to resume operations, an improvement in vehicle sales was experienced in June 2020. The Avis Rent a Car business has been significantly impacted by the COVID-19 crisis due to local and global travel restrictions which have particularly impacted the on-airport market segment. This crisis was expected have a prolonged impact on the cash flows in this business driven by an expected slow recovery of local and global tourism. Regulatory restrictions on used car sales and expectations for future used car sales volumes and margins also negatively impacted cash flow projections for this business. The impairment recognised is a reflection of projected cash flows as estimated at 31 March 2020 when the impairment was recognised and based on further impairment testing carried out at 30 September 2020 no additional impairment were recognised (in accordance with IAS 36 impairment to goodwill cannot be reversed).

note 2: BZAMM: Impairment recognised for current year.

Similar to the automotive industry, lower than expected short and long term growth rates in the African regions (BZAMM) negatively impacted expected mining and construction activity levels which drive the cash flows of this CGU. Further, the higher discount rate applied to these lower forecast cash flows was a primary driver of the impairment recognised during the year. At 30 September the uncertainty of the effects of COVID-19 on future cash flows has necessitated the use of judgements and assumptions in estimating the impact on the carrying value of certain assets, in applying the accounting policies in the preparation of the Annual Financial Statements. Accordingly, an impairment charge has been recognised in these regions for property, plant and equipment of R140 million (refer to note 10) and intangible assets of R708 million (refer to note 13).

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

At each impairment testing interval a discounted cash flow valuation model is applied using a five-year strategic plan as approved by the board. The financial plans are the quantification of strategies derived from the use of a common strategic planning process followed across the Group adjusted for the estimated impact of COVID-19 on the various businesses in the medium term and the expected prolonged recovery from this global crisis which has impacted long term growth rates across our businesses. The process ensures that significant risks and sensitivities are appropriately considered and factored into strategic plans.

The discount rate applied to the five year 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 operations. As at 30 September 2020 there was a marked increase in discount rates as a result of increased risk free rates used within the discount rate calculations together with higher country risk premiums across the territories in which we operate. The notable reduction in the discount rate applied to the Avis Rent a Car Southern Africa is a reflection of the lower borrowing rates prevailing in the market as well as taking into account the capital structure of comparable businesses, where the industry average ratio of Debt to Equity is considerably higher (when compared to trading businesses).The net effect is a higher proportion of a lower cost of debt in the discount rate.

Sales growth rates: sales growth rates have been derived by analysing historical data, considering growth rates projected by the senior management teams which includes price and volumes and considering the economic and trading conditions of each area within South Africa and the rest of the world.

Gross margins: gross margins have been derived by analysing historical data, approved forecast gross margins for the forecast period, and considering the impact of currency fluctuations.

Operating costs have been derived by analysing historical data, considering economic and trading conditions, committed and uncommitted capital expenditure, and operating requirements coupled by various operational improvement initiatives.

Working capital: working capital requirements are driven by required stock turn ratios, credit terms and capital expenditure requirements.

Long-term growth rates: long-term growth rates are based on the longer term inflation and currency expectations for the various industries in South Africa and the rest of the world.

As at 30 September 2020, management have performed sufficient sensitivity analysis to conclude that a reasonably possible change in key assumptions would not cause the carrying amount of the Group's individual cash-generating units to exceed their value in use.