inter roller fa final

Notes to the Financial StatementsCash and cash equivalentsCash and cash equivalents comprise cash on hand, bank deposits and highly liquid investments which arereadily convertible to cash and which are subject to an insignificant risk of changes in value. For the purpose ofthe statement of cash flows, cash and cash equivalents are presented net of bank overdrafts which are repayableon demand and which form an integral part of the Group’s cash management.Hire-purchase assetsWhere assets are financed by hire-purchase agreements that give rights approximating to ownership, the assetsare capitalized as if they had been purchased outright at values equivalent to the present value of the total rentalpayable during the periods of the hire-purchase and the corresponding hire purchase commitments are includedunder liabilities. The excess of the hire-purchase payments over the recorded hire-purchase liabilities are treatedas finance charges which are allocated over each hire purchase term to give a constant rate of charge on theremaining balance of the outstanding balance at end of each period.The hire-purchase assets are depreciated on a straight-line basis over their estimated useful lives.Rentals on operating leases are charged to the income statement on a straight-line basis over the lease term oron another systematic basis that is representative of the time pattern of the benefit obtained.LoansInterest-bearing loans and borrowings are recognised initially at cost, less attributable transaction costs.Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortised cost which isthe initial cost less any principal repayments. The interest expense is chargeable on the amortised cost over theperiod of the borrowings on an effective interest basis.PayablesPayables are carried at cost which is the fair value of the consideration to be paid in the future for goods andservices received, whether or not billed to the group and the company.Payables include trade and non-trade balances with third parties.ProvisionsProvisions are recognised when the Group and the Company have a present obligation (legal or constructive)as a result of a past event, it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of the amount of the obligation.The directors review provisions annually and where in their opinion, the provision is inadequate or excessive,due adjustment is made.Impairment of assetsThe carrying amounts of the Group’s and Company’s assets subject to impairment are reviewed at each balancesheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’srecoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an assetexceeds its estimated recoverable amount. Recoverable amount is defined as the higher of value in use andnet selling price.Any impairment loss is charged to the income statement unless it reverses a previous revaluation in which caseit is charged to equity.48 inter-roller engineering limited annual report2004