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Escher Group Holdings plc
Annual report 2011
29
Financial statements
Corporate governance
Business review
Overview
(xiv) Trade receivables
Trade receivables are recognised initially at fair value, which is normally the original invoiced amount and subsequently
measured at amortised cost using the effective interest rate method, less any provision for impairment. A provision for
impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect
all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or a financial re-organisation, default or delinquency in payments and general
economic conditions are considered indicators that the trade receivable is impaired.
(xv) Taxation
The company is managed and controlled in the Republic of Ireland and, consequently, is tax resident in Ireland.
Current tax is calculated on the profits of the period. Current tax is determined using tax rates (and laws) that have been
enacted by the balance sheet date.
Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements.
However, if the deferred tax arises from initial recognition of an asset or liability in a transaction, other than a business
combination, that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet
date and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled.
Deferred tax is recognised in other comprehensive income or directly in equity, if the tax relates to items that are credited
or charged, in the same or a different period, in other comprehensive income or directly in equity.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by
the same taxation authority on either the same taxable entity or different taxable entities where there is an intention
to settle the balances on a net basis.
(xvi) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried
at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised
in the income statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement for the liability
for at least 12 months after the balance sheet date.
(xvii) Financial assets and liabilities
Financial assets and liabilities carried on the statement of financial position include receivables, cash and bank balances,
borrowings and trade and other payables.
Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.
Financial assets and liabilities are offset when the Group has a legally enforceable right to offset and it intends to settle either
on a net basis or to realise the asset and settle the liability simultaneously.
(xviii) Share capital and other reserves
Ordinary shares and Convertible Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
(xix) Finance income
Interest income is recognised on a time-proportion basis using the effective interest method.
(xx) Derivative financial instruments
Interest rate swaps are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. Any gain or loss arising from the re-measurement of the fair value of derivatives are reported
in the Income Statement within “Finance Income/(Costs)”.
Derivatives are presented as current if realisation or settlement is expected within one year or the Group does not have
an unconditional right to defer payment; otherwise they are classified as non-current.