Annual Report for the year ended 31 December 2008

1. aCCoUntinG PoliCies (CONTINuED)
Measurement of available-for-sale financial assets
For available-for-sale financial assets that are quoted in active markets,
fair values are determined by reference to the current quoted bid/offer
price. Where independent prices are not available, fair values may be
determined using valuation techniques with reference to observable market
data. These may include comparison to similar instruments where market
observable prices exist, discounted cash flow analysis, option pricing models
such as Black-scholes and other valuation techniques commonly used by
market participants.
The management of the company makes an assessment at each Balance
sheet date as to whether there is any objective evidence of impairment,
being any circumstance where an adverse impact on estimated future cash
flows of the financial asset or group of assets can be reliably estimated.
in the case of equity investments classified as available-for-sale, the
cumulative loss (measured as the difference between the acquisition cost
and the current fair value, less any impairment loss on that financial asset
previously recognised in the income statement) is removed from equity and
recognised in the income statement. impairment losses recognised in the
income statement on available-for-sale equity investments are not reversed
through the income statement.
Trade and other receivables
Trade and other receivables (which include counterparty receivables) are
recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less 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 the receivables. evidence that an
impairment of the asset may be required include ageing of the debt beyond
180 days, persistent lack of communication and internal awareness of third
party trading difficulties.
The amount of the provision is the difference between the asset’s carrying
amount and the present value of estimated future cash flows, discounted at
the effective interest rate. The amount of the provision is recognised in the
income statement within operating expenses.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents
include cash in hand, deposits held at call with banks, and other short-term
highly liquid investments that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of change in value. such
investments are normally those with original maturities of three months or
less. Bank overdrafts are shown within borrowings in current liabilities on
the Balance sheet.
notes to tHe FinanCial statements CONTINuED
FOR THE YEAR ENDED 31 DECEMBER 2008
Trade and other payables
Trade and other payables are recognised initially at fair value, which is
the agreed market price at the time goods or services are provided. The
company accrues for all goods and services consumed but yet unbilled
at amounts representing management’s best estimate of fair value.
Evolution Group employees share trust
The Trust is a separately administered trust, which is funded by loans
from the company, and the assets of which comprise shares in the
company. The company recognises the assets and liabilities of the Trust
in its Financial statements and shares held by the Trust are recorded at cost
as a deduction in arriving at shareholders’ funds until the shares vest
unconditionally with employees.
iAs 39 has a scope for exclusion of treasury share transactions linked to
share-based payment awards. The Trust is considered to act as an agent for
the company, and accordingly aggregation of the Trust’s assets and
liabilities to reflect the substance of the relationship.
Group Recharge
The company, through the normal course of business, incurs costs on
behalf of its subsidiaries. These costs are recharged, where relevant,
to those subsidiaries.
The company recharges it subsidiaries for cash for the cost of share
options. The amount of the recharge is equivalent to the cost of shares
purchased by the company to satisfy the awards made to subsidiary
employees under the Group’s employee share scheme. This recharge
reduces the investment in subsidiary and a corresponding entry is made
to increase retained earnings.
Employee benefits
(a) Pension obligations
The company does not offer any company pension schemes. however, the
company does make defined contributions to employees’ approved personal
pension plans, and the costs of these are charged to the income statement
when they are incurred.
(b) Share-based plans
The company’s management awards high-performing employees bonuses
in the form of equity-settled share based payments, from time to time,
on a discretionary basis. in accordance with iFrs 2, ‘share-based
payments’, equity-settled share-based payments are measured at fair value
at the date of grant. Fair value is measured by use of the Black-scholes
pricing model or, in the case of awards of call rights, which have an exercise
price of 1p per ordinary share; the fair value is based on the market value at
the time of grant discounted by the dividend yield over the expected life. The
fair value determined at the grant date of the equity-settled share-based
payment is expensed on a straight-line basis over the vesting period, based
on the company’s estimate of the number of shares, which will eventually
vest. The options are generally subject to a three year service vesting
condition, and their fair value is recognised as an employee benefits
expense with a corresponding increase in equity over the vesting period.
The proceeds received net of any directly attributable transaction costs are
credited to share capital (nominal value) and share premium when the
options are exercised.
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