Effective Interest Method
The effective interest method is a method of calculating the
amortised cost of a financial asset held at amortised cost and of
allocating interest income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees on points paid or received that
form an integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the expected life of
the debt instrument, or (where appropriate) a shorter period, to
the net carrying amount on initial recognition.
Loans and Receivables
Trade receivables, loans, deposits and other receivables that
have fixed or determinable payments that are not quoted in an
active market are classified as 'loans and receivables'. Loans and
receivables are measured at amortised cost using the effective
interest method, less any impairment. Interest income is recognised
by applying the effective interest rate, except for short-term
receivables when the recognition of interest would be
immaterial.
Impairment of Financial Assets
Financial assets are assessed for indicators of impairment at
the end of each reporting period. Financial assets are considered
to be impaired when there is objective evidence that, as a result
of one or more events having occurred after the initial recognition
of the financial asset, the estimated future cash flows of the
investment have been affected.
For financial assets carried at amortised cost, the amount of
the impairment loss recognised is the difference between the
asset's carrying amount and the present value of estimated future
cash flows, discounted at the financial asset's original effective
interest rate.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in
profit or loss.
Trade payables
Trade and other accounts payables are stated at their fair value
net of transaction costs and are recognised when the Company
becomes obliged to make future payments resulting from the purchase
of goods and services.
3.4 Foreign currency
Translation to Presentation Currency
The functional currency of the Company (CEL) is Pound Sterling
("GBP") and the functional currency of its Indian Subsidiary is
Indian Rupees ("INR"). This financial information will be used by
the international investors and other stake holders as the
company's share have been listed in AIM, a market operated by the
London Stock Exchange, and for this reason US dollars ("US$") are
used as the presentational currency. At the reporting date, the
assets and liabilities of the Company are translated into US$ at
the rate of exchange prevailing at the balance sheet date and the
income statement is translated at the average exchange rates for
the period. The resulting exchange difference is recognised in the
Statement of Other Comprehensive Income.
3.5 Cash and cash equivalents
Cash comprises cash in hand and cash held on deposit. Cash
equivalents are short term, highly liquid investments that are
readily convertible to known amounts of cash, which are subject to
an insignificant risk of change in value.
3.6 Property, Plant and Equipment
Property, Plant and Equipment are stated at cost, less
accumulated depreciation and accumulated impairment losses.
Depreciation is provided to write off the cost of Property,
Plant and Equipment over their estimated useful lives after taking
into account their estimated residual value, using the
straight-line method as stated below:
Furniture and Fittings: 5 years
Office Equipment: 4-5 years
Computers: 4 years
At each reporting date, the Company reviews the carrying amounts
of its tangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If the
recoverable amount of an asset is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately.
The gain or loss on the disposal or retirement of an item of
property, plant and equipment is determined as the difference
between the sale proceeds and the carrying amount of the asset and
is recognised in profit or loss.
3.7 Revenue recognition
Interest income
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that discounts estimated future cash
receipts through the expected life of the financial asset to that
asset's net carrying amount on initial recognition
3.8 Expenses
Expenses are accounted on an accruals basis.
3.9 Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
statement of comprehensive income because it excludes items of
income or expense that are taxable or deductible in future years
and it further excludes items that are permanently exempt from tax
or allowable as a tax deduction. The Company's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial information and
the corresponding tax bases used in the computation of taxable
profit, and are accounted for using the statement of financial
position method. Deferred tax liabilities are generally recognised
for all taxable temporary differences, and deferred tax assets are
generally recognised for all deductible temporary differences to
the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can
be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the
Company is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse
in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments
and interests are only recognised to the extent that it is probable
that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future. The carrying amount
of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset
to be recovered. Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in the period in which
the liability is settled or the asset realised, based on tax rates
(and tax laws) that have been enacted or substantively enacted.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the
Company expects, at the reporting date, to recover or settle the
carrying amount of its assets and liabilities. Deferred tax assets
and liabilities are offset when there is a legally enforceable
right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets
and liabilities on a net basis.
3.10 Leasing
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases
Operating lease payments are recognised as an expense on a
straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as
an expense in the period in which they are incurred.
3.11 Share capital
Share capital is recognised at the fair value of consideration
received. Any excess over the nominal value of shares is taken to
the share premium reserve.
Costs incurred for issuing new share capital when the issuance
results in a net increase or decrease to equity are charged
directly to equity. Costs incurred for issuing new share capital
when the issuance does not result in a change to equity are taken
to the statement of comprehensive income.
3.12 Operating segments
IFRS 8 "Operating Segments" requires the segment information
presented in the financial information to be that which is used
internally by the chief operating decision maker to evaluate the
performance of the business and decide how to allocate resources.
The Company's internal reporting reviewed by the Board focuses on
the operations of the Company as a whole and does not identify
individual operating segments. Therefore the Company has only one
reportable segment.
Celadon Pharmaceuticals (LSE:CEL)
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Celadon Pharmaceuticals (LSE:CEL)
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