1. Accounting policies
Basis of measurement and preparation
These financial statements have been prepared in accordance with the provisions of Section 1A (Small Entities) of Financial Reporting Standard 102
Other accounting policies
1 Presentation of the annual financial
The annual financial statements of the company have been prepared in accordance with the ‘International Financial Reporting Standard for Small and Medium-sized Entities’ (IFRS for SMEs). The annual financial statements have been prepared on the historical cost basis, except where otherwise indicated, and incorporate the principal accounting policies set out below. They are presented in pounds. These accounting policies are consistent with the previous period.
1.1 Significant judgements and sources of estimation uncertainty
Critical judgements in applying accounting policies
Management are required to make critical judgements in applying accounting policies from time to time. The judgements, apart from those involving estimations, that have the most significant effect on the amounts recognised in the annual financial statements, are
outlined as follows:
Lease classification
The company is party to leasing arrangements, as a lessee. The treatment of leasing transactions in the annual financial statements is mainly determined by whether the lease is considered to be an operating lease or a finance lease. In making this assessment, management considers the substance of the lease, as well as the legal form, and makes a judgement about whether substantially all of the risks and rewards of ownership are transferred.
Key sources of estimation uncertainty
Useful lives of property, plant and equipment
The company reviews the estimated useful lives of property, plant and equipment when changing circumstances indicate that they
may have changed since the most recent reporting date.
Impairment testing
The company reviews and tests the carrying value of property, plant and equipment and intangible assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. When such indicators exist, management determine the recoverable amount by performing value in use and fair value calculations. These calculations require the use of estimates and assumptions. When it is not possible to determine the recoverable amount for an individual asset, management assesses the recoverable amount for the cash generating unit to which the asset belongs.
1.2 Financial instruments
Initial measurement
Financial instruments are initially measured at the transaction price (including transaction costs, except in the initial measurement of financial assets and liabilities that are measured at fair value through profit or loss) unless the arrangement constitutes, in effect, a financing transaction in which case it is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.
Financial instruments at amortised cost
These include loans, trade receivables and trade payables. Those debt instruments which meet the criteria in section 11.8(b) of the
standard, are subsequently measured at amortised cost using the effective interest method. Debt instruments which are classified as
current assets or current liabilities are measured at the undiscounted amount of the cash expected to be received or paid, unless the arrangement effectively constitutes a financing transaction.
At each reporting date, the carrying amounts of assets held in this category are reviewed to determine whether there is any objective
evidence of impairment. If there is objective evidence, the recoverable amount is estimated and compared with the carrying amount.
If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment
loss is recognised immediately in profit or loss.
Financial instruments at cost
Commitments to receive a loan are measured at cost less impairment.
Equity instruments that are not publicly traded and whose fair value cannot otherwise be measured reliably are measured at cost less impairment.
Financial instruments at fair value
All other financial instruments, including equity instruments that are publicly traded or whose fair value can otherwise be measured reliably, are measured at fair value through profit or loss.
1.3 Tax
Current tax assets and liabilities
Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of
current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.
Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered
from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the reporting
date.
The tax liability reflects the effect of the possible outcomes of a review by the tax authorities.
Deferred tax assets and liabilities
A deferred tax liability is recognised for all taxable temporary differences.
A deferred tax asset is recognised for all deductible temporary differences and for the carry forward of unused tax losses and unused tax credits.
Deferred tax assets and liabilities are measured at an amount that includes the effect of the possible outcomes of a review by the tax
authorities using tax rates that, on the basis of enacted or substantively enacted tax law at the end of the reporting period, are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax asset balances are reviewed at every reporting date. When necessary, a valuation allowance is recognised against the
deferred tax assets so that the net amount equals the highest amount that is more likely than not to be realised on the basis of current or future taxable profit.
Tax expenses
Tax expense is recognised in the same component of total comprehensive income or equity as the transaction or other event
that resulted in the tax expense.
1.4 Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership to the lessee. All
other leases are operating leases.
Operating leases – lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term unless:
another systematic basis is representative of the time pattern of the benefit from the leased asset, even if the payments are not on that basis, or
the payments are structured to increase in line with expected general inflation (based on published indexes or statistics) to compensate for the lessor’s expected inflationary cost increases.
Any contingent rents are expensed in the period they are incurred.
1.5 Impairment of assets
The company assesses at each reporting date whether there is any indication that property, plant and equipment or intangible assets
or goodwill may be impaired.
If there is any such indication, the recoverable amount of any affected asset (or group of related assets) is estimated and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.
If an impairment loss subsequently reverses, the carrying amount of the asset (or group of related assets) is increased to the revised
estimate of its recoverable amount, but not in excess of the amount that would have been determined had no impairment loss been recognised for the asset (or group of assets) in prior years. A reversal of impairment is recognised immediately in profit or loss.
1.6 Share capital
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
1.7 Employee benefits
Short-term employee benefits
The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as leave pay and sick
leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and
are not discounted.
1.8 Provisions and contingencies
Provisions are recognised when the company has an obligation at the reporting date as a result of a past event; it is probable
that the company will be required to transfer economic benefits in settlement; and the amount of the obligation can be estimated reliably.
Provisions are measured at the present value of the amount expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.
Provisions are not recognised for future operating losses.
Contingent assets and contingent liabilities are not recognised.
1.09 Revenue
Revenue is recognised to the extent that the company has transferred the significant risks and rewards of ownership of goods to the buyer, or has rendered services under an agreement provided the amount of revenue can be measured reliably and it is probable that economic benefits associated with the transaction will flow to the company. Revenue is measured at the fair value of the consideration received or receivable, excluding sales taxes and discounts.
Service revenue is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The Stage of completion is determined by surveys of work performed. When the outcome of a transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
Interest is recognised, in profit or loss, using the effective interest rate method.
1.10 Borrowing costs
Borrowing costs are recognised as an expense in the period in which they are incurred.