Company: KARO
Filing Date: 2025-06-09
Form Type: 20-F
Source: 0001213900-25-052372
Chunk: 115

Company: Karooooo Ltd.
Filing Date: 2025-06-09
Form: 20-F
Item: Item 4A
Chunk 115
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 critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results
may differ from these estimates under different assumptions and conditions.

Useful Life of Capitalized Telematics Devices, Capitalized
Commission Assets and Revenue Recognition from Deferred Revenue

We complete a detailed assessment
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 over
60 months 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.

Goodwill

We test 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 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 Unit (“ CGU”).

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

We apply a simplified approach
in calculating ECLs. Therefore, we do not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs
at each reporting date. We determine 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 credit
loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. At every reporting date, historical
default rates are updated and changes in the forward-looking estimates are analyzed.

The assessment of the correlation
between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive
to changes in circumstances and of forecast economic conditions. The historical credit loss experience and forecast of economic conditions
may also not be representative of customer’s actual default in the