Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks and other short-term liquid investments with original maturities of three months or less. Financial instruments 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 simultaneously. Basic financial assets Basic financial assets, which include debtors 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. Financial assets classified as receivable within one year are not amortised. Impairment of financial assets Financial assets are assessed for indicators of impairment at each reporting date. Where there is objective evidence that a debtor will not be recovered in full, an allowance is recognised in profit or loss for the amount not expected to be recovered. Basic financial liabilities Basic financial liabilities, including creditors and amounts owed to related parties, are initially recognised at transaction price unless the arrangement constitutes a financing transaction. Financial liabilities classified as payable within one year are not amortised. Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company. The costs of short-term employee benefits are recognised as a liability and an expense in the period in which the service is received. Payments to defined contribution pension schemes are charged as an expense as they fall due. Taxation The tax expense represents current tax. Current tax is based on taxable profit for the period, calculated using tax rates that have been enacted or substantively enacted by the reporting date. As the period of account exceeds twelve months, taxable profits are computed for two accounting periods for corporation tax purposes. Foreign exchange Transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate ruling at the reporting date, and gains and losses are included in profit or loss.