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 balance sheet 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 simultaneouly.
Basic Financial Assets
Basic Financial assets, which include debtors and cash and bank balances, are intially measured at transaction price including transaction cost and are subsequently carried at amortised cost using the effective mehod unless the arrangement constitutes a financing transactions, where the transactions 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.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangments entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after dedcuting all of its liabilities.
Basic Financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are intially recognised at transaction price unless the arrangment constitues 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 Creditors are obligations to pay for goods or services that have been acquired in the ordinary course of the 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 creditors are recognised initaiily at a transaction price and subsequently measured at amortised cost using the effective interest method.