Advanced Computer Software Group plc Annual report 2013

3 Significant accounting policies continuedFinancial instruments continuedFinancial liabilitiesThe Group’s financial liabilities are trade payables and other financial liabilities. These liabilities are initiallyrecognised at fair value and subsequently measured at amortised cost using the effective interest rate method.Unless otherwise indicated, the carrying amounts of the Group’s financial liabilities are a reasonable approximationof their fair values.Share capitalFinancial instruments issued by the Group are treated as equity only to the extent that they do not meet thedefinition of a financial liability. The Group’s ordinary shares are classified as equity instruments.Further information on the Group’s financial instruments can be found in note 20.Cash and cash equivalentsCash and cash equivalents comprise cash at bank and in hand, call deposits and short term deposits with amaturity of less than three months. Bank overdrafts are repayable on demand and form an integral part of theGroup’s cash management strategy.Leased assetsLeases where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases.Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and thepresent value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for inaccordance with the accounting policy applicable to that asset. Other leases are operating leases.Overview Business review Governance FinancialsOperating lease paymentsPayments made under operating leases are recognised in the income statement on a straight-line basis over theterm of the lease. Lease incentives received are recognised in the income statement as an integral part of the totallease expense.Foreign currency transactionsTransactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at theforeign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised inthe income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreigncurrency are translated using the exchange rate at the date of the transaction.The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation,are translated to the Group’s presentational currency, sterling, at foreign exchange rates ruling at the balance sheetdate. The revenues and expenses of foreign operations are translated at an average rate for the year, where this rateapproximates to the foreign exchange rates ruling at the dates of the transactions.Exchange differences arising from the translation of foreign operations are taken directly to the exchange revaluationreserve and are released into the income statement upon disposal of the foreign operation in due course.Revenue recognitionThe Group’s revenues are derived from the sale of software product licences, the associated consultancy services,hardware, maintenance, managed services and supplies of third party software. All revenue is reported exclusiveof value added tax.The Group will only recognise revenue when:> > persuasive evidence of an arrangement exists. This is typically a signed contract or customer purchase order;> > the price to the customer is fixed or determinable;> > delivery has occurred; and> > collectability is reasonably assured and there are no material outstanding conditions or contingencies attachingto the receipt of monies due.Advanced Computer Software Group plcAnnual Report 201343