Cash and cash equivalentsCash and cash equivalents are basic financial instruments and include cash in hand and deposits held atcall with banks.Financial instrumentsThe company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ of FRS 102 toall of its financial instruments.Financial instruments are recognised when the company becomes party to the contractual provisions ofthe instrument.Financial assets and liabilities are offset, with the net amounts presented in the financial statements, whenthere is a legally enforceable right to set off the recognised amounts and there is an intention to settle on anet basis or to realise the asset and settle the liability simultaneously.Basic financial assetsBasic financial assets, which include trade and other debtors and cash and bank balances, are initiallymeasured at transaction price including transaction costs and are subsequently carried at amortised costusing the effective interest method.Classification of financial liabilitiesFinancial liabilities and equity instruments are classified according to the substance of the contractualarrangements entered into. An equity instrument is any contract that evidences a residual interest in theassets of the company after deducting all of its liabilities.Basic financial liabilitiesBasic financial liabilities, including trade and other creditors, are initially recognised at transaction priceunless the arrangement constitutes a financing transaction, where the debt instrument is measured at thepresent value of the future payments discounted at a market rate of interest.Equity instrumentsEquity instruments issued by the company are recorded at the fair value of proceeds received, net of directissue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longerat the discretion of the company.TaxationThe tax expense represents the sum of the current tax expense and deferred tax expense. Current taxassets are recognised when tax paid exceeds the tax payable.Current and deferred tax is charged or credited to profit or loss, except when it relates to items charged orcredited to other comprehensive income or equity, when the tax follows the transaction or event it relates toand is also charged or credited to other comprehensive income, or equity.Current tax assets and current tax liabilities and deferred tax assets and deferred tax liabilities are offset, ifand only if, there is a legally enforceable right to set off the amounts and the entity intends either to settleon the net basis or to realise the asset and settle the liability simultaneously.Current tax is based on taxable profit for the year. Current tax assets and liabilities are measured using taxrates that have been enacted or substantively enacted by the reporting period.Employee benefitsThe costs of short-term employee benefits are recognised as a liability and an expense, unless those costsare required to be recognised as part of the cost of stock or fixed assets.The cost of any unused holiday entitlement is recognised in the period in which the employee’s servicesare received.Retirement benefitsFor defined contribution schemes the amount charged to profit or loss is the contributions payable in theyear. Differences between contributions payable in the year and contributions actually paid are shown aseither accruals or prepayments.LeasesRentals payable under operating leases, including any lease incentives received, are charged to incomeon a straight line basis over the term of the relevant lease except where another more systematic basis ismore representative of the time pattern in which economic benefits from the lease asset are consumed.Foreign exchangeTransactions in currencies other than the functional currency (foreign currency) are initially recorded at theexchange rate prevailing on the date of the transaction.Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchangeruling at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies aretranslated at the rate ruling at the date or the transaction, or, if the asset or liability is measured at fairvalue, the rate when that fair value was determined.All translation differences are taken to profit or loss, except to the extent that they relate to gains or losseson non-monetary items recognised in other comprehensive income, when the related translation gain orloss is also recognised in other comprehensive income.