Financial instruments are recognised in the company's statement of financial position when the company become
party to the contractual provisions of the instrument.
Basic financial assets
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 rate method unless the arrangement constitutes a financing transaction, where the transaction is
measured as the present value of the future receipts discounted at a market rate of interest.
Financial assets classified as receivable within one year are not amortised.
Cash and cash equivalents
Cash and cash equivalents are basic financial instruments and include cash in hand, deposits held at call with
banks, other short term liquid investments with original maturities of three months or less, and bank overdrafts.
Bank overdrafts are shown within borrowings within current liabilities.
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 trade and other payables, bank loans, loans from group companies and
preference shares that are classified as 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 future payments
discounted at a market rate of interest. Financial liabilities classified as payable within one year are not
amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest method.
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of
business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or
less. If not, then they are presented as non-current liabilities. Trade payables are recognised initially at
transaction price and subsequently measured at amortised cost using the effective interest method.
Employee benefits
The costs of short term employee benefits are recognised as a liability and an expense, unless those costs are
required to be recognised as part of the cost of stock or non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee's services are
performed.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to
terminate the employment of an employee or to provide termination benefits.