Adcock Ingram Integrated Report 2018

Notes to the Group annual financial statements continued 87 ADCOCK INGRAM  Integrated Report 2018 11 INTANGIBLE ASSETS (continued) Sensitivity to change in assumptions The implications of the key assumptions for the recoverable amount are discussed below: Gross margin A decreased demand and cost input inflation in excess of selling price increases can lead to a decline in the gross margin which could result in an impairment of intangibles. Discount rates A material increase in excess of 4% in the discount rate would result in impairment. Rawmaterials price inflation Management has considered the possibility of greater than forecast increases in rawmaterial price inflation. If prices of rawmaterials increase greater than the forecast price inflation and the Group is unable to pass on, or absorb these increases through efficiency improvements, then the Group will have an impairment. Market share assumptions Although management expects the Group’s market share to be stable over the forecast period, a material decline in the market share would result in an impairment. Growth rate estimates Management acknowledges that new entrants into the market could have a significant impact on growth rate assumptions. This is not expected to have a material adverse impact on forecasts, but could yield a reasonably possible alternative to the estimated long-term growth rate which could result in impairment. 12 DEFERRED TAX 2018 2017 R‘000 R‘000 Balance at beginning of year (71 550) (67 739) Acquisition of business (refer note 1) (27 622) 204 Movement through profit or loss 555 2 836 Exchange rate adjustments (388) 825 Revaluations of foreign currency contracts (cash flow hedges) to fair value (1 782) (7 674) Revaluation of available-for-sale asset to fair value (7) (2) Balance at end of year (100 794) (71 550) Analysis of deferred tax This balance comprises the following temporary differences: Trademarks (50 909) (17 477) Property, plant and equipment (137 402) (142 117) Pre-payments (5 189) (2 782) Income received in advance 15 468 6 350 Provisions 79 762 77 432 Revaluations of foreign currency contracts (cash flow hedges) to fair value (4 003) (2 221) Tax loss available for future use 1 083 10 514 Other 396 (1 249) (100 794) (71 550) Disclosed as follows: Deferred tax asset 18 120 1 588 Deferred tax liability (118 914) (73 138)