Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to setoff the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include trade and other receivables and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the financial asset is measured at the present value of the future receipts discounted at a market rate of interest.
Trade debtors, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loansand receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for shortterm receivables when the recognition of interest would be immaterial.The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over therelevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debtinstrument to the net carrying amount on initial recognition.
Basic financial liabilities, including trade and other payables, bank loans, loans from fellow group companies and preference shares that are classifiedas debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method. 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.