Judgment and estimates
The useful lives, residual values and depreciation method are reviewed on a regular basis. The effect of any changes in estimate is accounted for on a prospective basis.
Impairment
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquidinvestments that are readily convertible to a known amount of cash and are subject to an insignifcant risk ofchanges in value.
Borrowings
All borrowings are initially recorded at fair value less transaction costs. Borrowings are subsequently carried atamortised cost, with the difference between the proceeds, net of transaction costs, and the amount due onredemption being recognised as a charge to the income statement over the period of the relevant borrowing.Interest expense is recognised on the basis of the effective interest method and is included in cost of sales.Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlementof the liability for at least 12 months afer the reporting date.
Trade Payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Revenue Recognition
The principles in IFRS are applied to revenue recognition criteria using the following 5 step model:
- Identify the contracts with the customer;
- Identify the performance obligations in the contract;
- Determine the transaction price;
- Allocate the transaction price to the performance obligations in the contract and
- Recognise revenue when or as the entity satisfes its performance obligations.
Related Party Transactions
All transactions involving related parties arising in the normal course of business are conducted and recorded at rates that are not less than market, except in rare circumstances where, subject to the approval of the Board of Directors, it is in the interest of the Company to do so.
Offsetting
Financial assets and financial liabilities are off-set and the net amount is reported in the statement of financial position if the Company has a legally enforceable right to set-off the recognized amounts and intends either to settle on a net basis or to realize the assets and settle the liabilities simultaneously.
Financial Instrument
Financial assets and financial liabilities are recognized in the statement of financial position when the Company becomes a party to the contractual provisions of the instrument. All the financial assets are derecognized at the time when the Company losses control of the contractual rights that comprise the financial assets. All financial liabilities are derecognized at the time when they are extinguished that is, when the obligation specified in the contract is discharged, cancelled, or expires. Any gains or losses on de-recognition of the financial assets and financial liabilities are taken to the profit or loss.
A) Financial assets
The Company classifies its financial assets in the following measurement categories:
- Amortized cost where the effective interest rate method will apply;
- fair value through profit or loss (FVTPL) ;
- fair value through other comprehensive income (FVTOCI) The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income (OCI). For investment in equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVTOCI). The Company reclassifies debt investments when and only when its business model for managing those assets changes
.
Recognition and Derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Company commit to purchase or sell the asset. Further financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Company measure a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss.
Debt instruments
Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset and the cash flow characteristics of the asset. The Company categories debt instrument financial asset at amortised costs
Amortised cost
Assets that are held for collection of contractual cash flows where the contractual terms of the financial assets give rise on specified dates to cash flows that represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other income together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the profit or loss.
Impairment of financial assets
The Company assess on a historical as well as forward-looking basis, the expected credit loss (ECL) as associated with its debt instruments, trade debts, short term investments, deposits and other receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
Following are financial instruments that are subject to the ECL model:
- Trade debts
- Deposits and other receivables
- Cash and bank balances
B) Financial Liabilities
Classification, initial recognition and subsequent measurement
Financial liabilities are classified in the following categories:
- fair value through profit or loss; and
- other financial liabilities
The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value and, in case of other financial liabilities also include directly attributable transaction costs. The subsequent measurement of financial liabilities depends on their classification, as follows:
Fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as being at fair value through profit or loss. The Company has not designated any financial liability upon recognition as being at fair value through profit or loss.
Other financial liabilities
After initial recognition, other financial liabilities which are interest bearing subsequently measured at amortized cost, using the effective interest rate method. Gain and losses are recognized in profit or loss for the year, when the liabilities are derecognized as well as through effective interest rate amortization process.
Derecognition of financial liabilities
The Company derecognises financial liabilities when and only when the Company’s obligations are discharged, cancelled or they expire.
Events after the reporting date
The Company financial statements are adjusted to reflect events that occurred between the reporting date and the date when the financial statements are authorised for issue, provided they give evidence of conditions that existed at the reporting date. Any post year-end events that are non-adjusting are disclosed in the financial statements when material.
Foreign Currency Transactions and Translations
Transactions in foreign currencies are converted into GBP (£) at the rates of exchange ruling on the date of transition. All assets and liabilities denominated in foreign currencies are translated into functional currency at exchange rate prevailing at the balance sheet date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary items at year-end exchange rates, are charged to profit or loss account for the year.