2012 TPSEA Annual Report - Serena Hotels

Notes to the Financial Statements (continued)
20 Intangible asset - Group
Goodwill 2011 2010
Shs’000
Shs’000
Cost 1,057,861 1,077,869
Impairment - (20,008)
Net book amount 1,057,861 1,057,861
Impairment during the year 2010 relates to the write off of goodwill relating to Samburu Serena Safari Lodge which
forms part of the Kenya operating segments. This lodge was fully damaged by floods in March 2010 and has since
not been operational.
Impairment tests for goodwill
Goodwill is allocated to the group’s operating segments identified according to the location of operation and business
segment.
An entity-level summary of the goodwill allocation is presented below:
2011 2010
Shs’000
Shs’000
Tourism Promotion Services (Kenya) Limited 324,643 324,643
Tourism Promotion Services (Tanzania) Limited 576,345 576,345
Tourism Promotion Services (Zanzibar) Limited 154,671 154,671
Tourism Promotion Services (Mangapwani) Limited 2,202 2,202
1,057,861 1,057,861
A summary of the segment level goodwill allocation is presented in Note 5.
The recoverable amount of an operating segment is determined based on value-in-use calculations. These calculations
use cash flow projections based on financial projections approved by management covering a five-year period. Cash
flows beyond the five-year period are extrapolated using estimated growth rates. The growth rates do not exceed
the long-term average growth rates for the respective businesses in which the operating segments operate.
Key assumptions used for value-in-use calculations:
Kenya Tanzania Zanzibar
EBITDA margin1 23% 37% 37%
Growth rate2 2% 2% 2%
Discount rate3 12.3% 12.5% 12.5%
1 Budgeted EBITDA margin
2 Weighted average growth rate used to extrapolate cash flows beyond the projected period.
3 Pre-tax discount rate applied to the cash flow projections.
These assumptions have been used for the analysis of each operating segment within the business segment.
Management determined budgeted EBITDA margin based on past performance and its expectations for the market
development. The weighted average growth rates used are consistent with the forecasts included in industry
reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant segments.
74 TPS EASTERN AFRICA LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS 2011