Notes to the financial statements | Note 8.2

8. Taxation
8.2 Deferred taxation
 

Significant accounting judgements, estimates and assumptions

Deferred taxation asset

Management's judgement is exercised when determining the probability of future taxable profits which will determine whether deferred taxation assets should be recognised or derecognised. The realisation of deferred taxation assets will depend on whether it is possible to generate sufficient taxable income, taking into account any legal restrictions on the length and nature of the taxation asset. When deciding whether to recognise unutilised deferred taxation credits as deferred tax assets, management needs to determine the extent that the future obligations are likely to be available for set-off against the deferred taxation asset. In the event that the assessment of the future obligation and future utilisation changes, the change in the recognised deferred taxation asset is recognised in profit or loss. The carrying amount of the deferred tax asset is reviewed at each reporting date and adjusted to reflect changes in the probability that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Source of estimation uncertainty

Deferred tax assets are recognised for unused tax losses, unused tax credit and deductible temporary differences (as applicable) to the extent that it is probable that future taxable profits will be available against which the deferred tax assets can be used. The Group is required to make significant estimates in assessing whether future taxable profits will be available.

Future taxable profits are determined based on business plans for individual entities in the Group and the probable reversal of taxable temporary differences in future. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Such reductions are reversed when the probability of future taxable profits improves. The Group recognised deferred tax assets in the current year amounting to R4 304 million (31 March 2022: R308 million).

Based on the five-year business plan, it is envisaged that Telkom will have future taxable profits available against which the deferred tax asset can be used.
 
   Group  Company 
   31 March 
2023 
Rm 		 31 March 
2022 
Rm 		 31 March 
2023 
Rm 		 31 March 
2022 
Rm 
Deferred taxation1  4 064  71  1 415  (28)
Opening balance  71  497  (28) 376 
Profit and loss and opening balance movements  4 022  (356) 2 039  (325)
Capital allowances2  3 252  (493) 1 490  (566)
Provisions and other allowances  293  (186) 345  (128)
Tax losses  470  353  197  345 
Overprovision/(underprovision) prior year  7  (6) 7  39 
Rate change  –  (24) –  (15)
Common control transactions/business combinations  9  8  (568) – 
Other comprehensive income deferred tax impact1  (38) (78) (28) (79)
The balance comprises:  4 064  71  1 415  (28)
Capital allowances2  (697) (3 628) (2 242) (3 654)
Provisions and other allowances  3 766  3 215  2 873  3 038 
Business combination  (40) (49) –  – 
Common control transactions  (31) (30) –  – 
Tax losses  1 523  1 028  1 241  1 017 
Other comprehensive income tax impact  (457) (465) (457) (429)
Deferred taxation balance is made up as follows:1   4 064  71  1 415  (28)
Deferred taxation assets2  4 304  308  1 415  – 
Deferred taxation liabilities  (240) (237) –  (28)
 
1

The Group considered the following factors in assessing whether it is probable that the Group will have future taxable profits against which the deferred tax asset (DTA) can be utilised:

  • It is expected that the circumstances resulting in the Group's tax losses will not continue and that no additional tax losses will arise within the next two to three years.
  • The DTA that arose as a result of the impairment of property, plant and equipment and intangible assets will be utilised within approximately 8 years through the use of the assets impaired.
2

The increase of R3 993 million in the DTA balance is attributable to the following:

  • R4 031 million net movement in temporary differences through the statement of profit or loss, primarily as a result of the DTA recognised on the impairment of property, plant and equipment and intangible assets and the DTA recognised on tax losses; and
  • Set off by the R38 million movement through other comprehensive income (OCI) primarily as a result of the additional deferred tax liability raised in Telkom on the net defined benefit plan remeasurements.