Company: KARO
Filing Date: 2025-06-09
Form Type: 20-F
Source: 0001213900-25-052372
Chunk: 188

Company: Karooooo Ltd.
Filing Date: 2025-06-09
Form: 20-F
Item: Item 19
Chunk 188
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 annually on the expected
life cycle of subscriber contracts across the Group. The continued growth in our customer base over the past few years has provided a
more comprehensive database of information and more certainty to support the assessment of the average useful life of subscriber contracts
with customers. On the basis of such information, the average useful life of a subscriber contract was over60months as at financial
year ended February 28, 2025. Contracts that terminate prior to the end of useful life result in accelerated depreciation of the underlying
capitalized telematics devices and capitalized commission assets being recognized immediately.

ii.
Goodwill

The Group tests goodwill for impairment
on an annual basis. The recoverable amounts of cash-generating units have been determined based on the higher of value-in-use calculations
and fair value less costs of disposal. The value-in-use calculations are performed internally by the Group and require the use of various
estimates and assumptions regarding discount rates and the future financial performance of the cash-generating units. The fair value less
costs of disposal are performed by an external valuer using the market approach, by applying price-to-value metrics observed in comparable
companies to the Cash Generating units (“ CGU”).

The Group’s goodwill is subjected
to impairment assessment annually as at year end and when circumstances indicate that the carrying value may be impaired. For impairment
assessment, management uses valuation techniques which involve significant judgment in estimating the recoverable amounts of these assets.
Any shortfall of the recoverable amounts against the carrying amounts of these assets will be recognized as impairment losses. The recoverable
amounts are most sensitive to the discount rates used for the discounted cash flow model as well as the expected future cash inflows and
the growth rate used for extrapolation purposes. The carrying amounts of the Group’s goodwill and key assumptions applied in the
determination of the recoverable amounts including a sensitivity analysis, are disclosed and further explained in Note 8 to the financial
statements.

iii.
Provision for expected credit losses (“ ECLs”) of trade receivables

For trade receivables, the Group applies
a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance
based on lifetime ECLs at each reporting date. The Group determines expected credit losses of trade receivables by making debtor-specific
assessment of expected impairment loss for long overdue trade receivables and using a provision matrix for remaining trade receivables
that is based on its historical