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 statement of financial position when the company becomes
party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a
legally enforceable right to set off 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
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 transaction is measured at 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.
Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint
ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently
carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity
instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less
impairment.
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment
at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred
after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is
impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated
cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the
impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying
amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised
in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are
settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to
another entity, or if some significant risks and rewards of ownership are retained but control of the asset has
transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
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 fellow 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 the 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 rate method.
Trade payables 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 if payment is due within one year or less. If not,
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.
Other financial liabilities
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs
or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value
through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to
eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a
fair value basis in accordance with a documented risk management or investment strategy.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.