Annual Report for the year ended 31 December 2008

1. aCCoUntinG PoliCies (CONTINuED)
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 Group 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.
Derivative financial instruments
Derivative contracts relating to equity options and warrants held have been
acquired at zero cost in lieu of corporate finance fees. WDB capital uK equity
Fund limited holds contracts for difference (“cFD”) and these are brought
into the Group on consolidation. Derivatives are initially accounted for and
measured at fair value on the date a derivative contract is entered into and
subsequently measured at fair value. The gain or loss on re-measurement is
taken to the income statement within trading income. Fair values are obtained
from quoted prices prevailing in active markets, including recent market
transactions, and valuation techniques, including discounted cash flow models
and options pricing models as appropriate. All derivatives are included in
assets when their fair value is positive and liabilities when their fair value is
negative, unless there is the legal ability and intention to settle net.
The regular way purchase or sale of held for trading financial assets is recognised
using trade date accounting. A regular way purchase or sale is a purchase or
sale of a financial asset under a contract whose terms require delivery of the
asset within the time frames established generally by regulation or convention
in the marketplace concerned. purchases or sales that do not fall within the
regular way classification (generally beyond three days settlement) are treated
as derivatives in the period between the trade date and the settlement date,
i.e. as a forward purchase or sale of security. The contract value (i.e. the trade
date receivable or payable) of such transactions is not recorded on the
Balance sheet, but the change in fair value is recognised on the Balance
sheet and income statement within trading income in the intervening period
between the trade date and settlement date.
Stock borrowing and lending
The Group enters into stock borrowing and lending arrangements with
certain institutions on a collateralised basis with securities or cash advanced
or received as collateral. The transfer of securities to institutions is not
reflected on the Balance sheet. Where cash collateral is advanced or
received, an asset or liability is recorded at the amount of cash collateral
advanced or received. securities borrowed are recognised on the Balance
sheet and are recorded as a trading liability and measured at fair value.
Fees charged in the course of borrowing are recorded on an accruals basis
and included within other operating expenses. interest received or paid on
collateral is included within finance income or expense.
notes to tHe FinanCial statements CONTINuED
FOR THE YEAR ENDED 31 DECEMBER 2008
48 The evoluTion Group plc AnnuAl reporT & AccounTs 2008
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 includes 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.
Trade and other payables
Trade and other payables (which includes counterparty payables) are
recognised initially at fair value, which is the agreed market price at the
time goods or services are provided and are subsequently recorded at
amortised cost using the effective interest rate. The Group accrues for all
goods and services consumed but as yet unbilled at amounts representing
management’s best estimate of fair value.
Provisions
provisions are recognised for present obligations arising as consequences
of past events where it is probable that a transfer of economic benefit will
be necessary to settle the obligation and it can be reliably estimated.
provisions for dilapidation on leasehold premises are recognised as a liability
in all years over the life of the lease and discounted to fair value at an
effective interest rate over the period of the property lease. The accrual is
based on expected costs to be incurred at the end of the lease period to
bring the building back into a suitable state discounted to the net present
value using an effective discount rate that reliably calculates the present
value of the future obligation.
contingent liabilities are possible obligations whose existence will be
confirmed only by uncertain future events or present obligations where the
transfer of economic benefit is uncertain or cannot be reliably measured.
contingent liabilities are not recognised in the Financial statements,
however, they are disclosed unless considered remote.
Employee benefits
(a) Pension obligations
The Group does not offer any company pension schemes. however, the
Group 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.