TPSEAL 2010 Financial Results. - Serena Hotels

Notes to the Financial Statements (continued)
20 INTANGIBLE ASSET - GROUP
Goodwill 2010 2009
Shs’000
Shs’000
Cost 1,077,869 1,077,869
Impairment (20,008) -
Net book amount 1,057,861 1,077,869
Impairment during the year relates to the write off 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:
2010 2009
Shs’000
Shs’000
Tourism Promotion Services (Kenya) Limited 324,643 344,651
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 1,077,869
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 margin 1 23% 37% 37%
Growth rate 2 2% 2% 2%
Discount rate 3 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 2010