3 Accounting policies
Basis of preparation
The
financial statements
have been prepared on the historical cost basis, as modified by the revaluation of certain assets.
The
financial statements
are prepared in sterling, which is the functional currency of the company.
Going concern
The director has not identified any material uncertainties related to events or conditions that may cast significant doubt about the company's ability to continue as a going concern.
Judgements and key sources of estimation uncertainty
Provision for doubtful debts - the provision for doubtful debts is updated at the end of each year based on the information available to the director at time and takes into consideration the age of the debt and the circumstances of the customer.
Turnover
Turnover is measured at the fair value of the consideration received or receivable, net of discounts and value added taxes. Turnover includes revenue earned from the interest earned on lending agreements. Interest is only recognised as revenue to the point at which the debt is considered recoverable. Interest is charged to the profit and loss account straight line over the life of the lending agreement.
Current tax
Current tax is recognised on taxable profit for the current and past periods. Current tax is measured at the amounts of tax expected to pay or recover using the tax rates and laws that have been enacted or substantively enacted at the reporting date.
Goodwill
Goodwill is the difference between amounts paid on the acquisition of a business and the fair value of the separable net assets. It is amortised to profit and loss account over its estimated economic life of 10 years.
Tangible assets
Tangible fixed assets are measured at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:
| Office equipment | 25% reducing balance |
Impairment
A review for indicators of impairment is carried out at each reporting date, with the recoverable amount being estimated where such indicators exist. Where the carrying value exceeds the recoverable amount, the asset is impaired accordingly. Prior impairments are also reviewed for possible reversal at each reporting date.
Financial instruments
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 entity after deducting all of its financial liabilities. Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.
Deferred tax
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the reporting date. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is more likely than not that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
Deferred tax is measured on an undiscounted basis at the tax rates that would apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted at the statement of financial position date.