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 
Purchase 
price 
allocations 
and fair 
value gains 
R'000 
Provisions 
R'000 
Tax  losses 
R'000 
Prepay- 
ments 
R'000 
Unrealised 
foreign 
exchange 
differences 
R'000 
Other 
R'000 
Total 
R'000 
 
At 31 May 2018  10 442  208 183  (31 989) (24 009) 5 288  15 051  911  183 877    
Adjustment on the initial application of IFRS 9  —  —  (10 067) (378) —  —  (276) (10 721)   
Adjustment on the initial application of IFRS 15  —  —  —  —  —  —  (11 816) (11 816)   
Charged/(credited) to the income statement  3 622  (28 506) (6 188) (8 146) 1 145  6 181  7 344  (24 548)   
Acquisition of subsidiaries  (82) 39 302  —  (18 067) —  —  —  21 153    
Foreign currency translation reserve  —  2 407  —  —  —  —  —  2 407    
At 31 May 2019  13 982  221 386  (48 244) (50 600) 6 433  21 232  (3 837) 160 352    
Charged/(credited) to the income statement  (1 243) (17 491) 1 179  17 576  (58) 3 707  (9 117) (5 447)   
Acquisition of subsidiaries  (101) —  —  (1 778) —  —  271  (1 608)   
Foreign currency translation reserve  —  4 534  —  —  —  —  —  4 534    
Disposal of subsidiaries  (12 300) (98 867) 11 151  1 755  (619) (1 190) (130) (100 200)   
At 31 May 2020  338  109 562  (35 914) (33 047) 5 756  23 749  (12 813) 57 631    
  2020 
R'000 
  2019 
R'000 
  
Deferred tax asset comprises: 
Capital allowances  (327)   —    
Provisions  (35 914)   (48 244)   
Tax losses  (33 047)   (50 600)   
Other  (20 600)   (8 760)   
Total deferred tax asset  (89 888)   (107 604)   
Deferred tax liability comprises: 
Capital allowances  665    13 982    
Purchase price allocations and fair value gains  109 562    221 386    
Prepayments  5 756    6 433    
Unrealised foreign exchange differences  23 749    21 232    
Other  7 787    4 923    
Total deferred tax liability  147 519    267 956    
Net deferred tax  57 631    160 352    
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  (10 398)   (3 532)   
Deferred tax assets to be recovered within 12 months  (56 961)   (72 516)   
Net deferred tax asset  (67 359)   (76 048)   
Deferred tax liabilities         
Deferred tax liabilities to be recovered after more than 12 months  44 455    197 710    
Deferred tax liabilities to be recovered within 12 months  80 535    38 690    
Net deferred tax liability  124 990    236 400    
Net deferred tax  57 631    160 352    

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 R140.7 million (2019: R139.2 million) in respect of losses amounting to R562.9 million (2019: R557.5 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.