Notes to the Group annual financial statements l Note 7.2

7. Taxation
7.2 Deferred taxation

Deferred taxation is provided using the liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes.

However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by year-end and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.


Critical accounting estimates and assumptions

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.


  Capital 
allowances 
R’000 
Fair 
value 
gains 
R’000 
Pro- 
visions 
R’000 
Tax 
losses 
R’000 
Pre- 
payments 
R’000 
Un-
realised 
foreign 
exchange 
differences 
R’000 
Other 
R’000 
Total 
R’00 
 
At 31 May 2015 322  47 985  (19 171) (21 173) 2 354  14 410  (1 074) 23 653   
Charged/(credited) to the income statement   (841)   (6 270)   (359)   1 471    1 973    19 458    (2 069)   13 363   
Disposal of subsidiary   61    —    869    3 083    (59)   —    (41)   3 913   
At 31 May 2016 (458) 41 715  (18 661) (16 619) 4 268  33 868  (3 184) 40 929   
Charged/(credited) to the income statement 7 828  (5 411) (3 720) 1 050  (1 466) (16 134) 3 900  (13 953)  
Acquisition of subsidiary       (721)       (721)  
At 31 May 2017 7 370  36 304  (22 381) (16 290) 2 802  17 734  716  26 255   

   2017 
R’000 
    2016 
R’000 
  
Deferred tax asset comprises:           
Capital allowances       (817)   
Provisions (23 076)     (18 768)  
Tax losses (16 290)     (16 619)  
Other (5 262)     (3 184)  
Total deferred tax asset (44 628)     (39 388)  
Deferred tax liability comprises:          
Capital allowances 7 370      359   
Fair value gains 36 304      41 715   
Provisions 695      107   
Prepayments 2 802      4 268   
Unrealised foreign exchange differences 17 734      33 868   
Other 5 978         
Total deferred tax liability 70 883      80 317   
Net deferred tax 26 255      40 929   
The analysis of deferred tax assets and deferred tax liabilities is as follows:          
Deferred tax assets          
Deferred tax assets to be recovered after more than 12 months 10 396      1 713   
Deferred tax assets to be recovered within 12 months (37 093)     (22 925)  
Net deferred tax asset (26 697)     (21 212)  
Deferred tax liabilities          
Deferred tax liabilities to be recovered after more than 12 months 44 168      68 217  
Deferred tax liabilities to be recovered within 12 months 8 784      (6 076)  
Net deferred tax liability 52 952      62 141   
Net deferred tax 26 255      40 929   

Where deferred tax assets have been recognised in respect of entities which have incurred losses in the current or prior years, a formal process of assessment of the future profitability of the entity has been performed based on detailed budgets and cash flow forecasts. As a result, management believes that the current tax losses will be utilised within one to five years.

Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred income tax assets of R44.3 million (2016: R44.3 million) in respect of losses amounting to R158.5 million (2016: R158.2 million) that can be carried forward against future taxable income.

There is no withholding tax that would be payable on any dividends received from the Group’s equity accounted associates and joint ventures and therefore no deferred tax has been raised in this regard. Deferred tax at the CGT rate has been raised on investments in associates and joint venture that are classified as venture capital investments.


Notes to the Group annual financial statements l Note 7.2