The company has elected to apply the provisions of Section 11 'Basic Financial Instruments' and Section 12 'Other Financial Instruments Issues' of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's statement of financial position whenthe company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts andthere is an intention to settle on a net basis or to realise the asset and settle the liabilitysimultaneously.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initiallymeasured at transaction price including transaction costs and are subsequently carried atamortised cost using the effective interest method unless the arrangement constitutes afinancing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivablewithin one year are not amortised.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cashflows fromthe asset expire or are settled, or when the company transfers the financial asset andsubstantially all the risks and rewards of ownership to another entity, or if some significantrisks and rewards of ownership are retained but control of the asset has transferred toanother party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substanceof thecontractual arrangements entered into. An equity instrument is any contract that evidences aresidual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, are initially recognised at transaction priceunless the arrangement constitutes a financing transaction, where the debt instrument ismeasured at the present value of the future payments discounted at a market rate ofinterest. Financial liabilities classified as payable within one year are not amortised.