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 balance sheet when the company becomes party to the contractual provisions of the instrument.
Basic financial assets
Basic financial assets, which include debtors and bank balances, are measured at transaction price including transaction costs.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, are recognised at transaction price including transaction costs.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities.
Convertible debt
Other financial instruments issued by the Company comprise of convertible loan notes that can be converted to share capital at the option of the holder. The interest on the loan notes is compounding annually and as such the number of shares to be issued will vary with changes in fair value.
Due to the varying number of shares to be issued, the loan noes are treated as liabilities and not split between equity and liabilities. The liability is initially and subsequently measured at cost.
Transaction costs that relate to the issue of the instrument are expensed to the profit and loss account.