2.  Accounting policies (Continued)

d)  Taxation (Continued)

Income tax expense or income, comprising current tax and deferred tax, is recorded in the Statement of Profit or Loss and Other Comprehensive Income account except income tax on items recognised outside profit or loss which is credited or charged to other comprehensive income or to equity as appropriate.

Current tax is income tax payable or recoverable in respect of the taxable profit or loss for the financial year arising in income or in equity. Provision is made for current tax at rates enacted or substantively enacted at the Statement of Financial Position date.

Deferred tax is the tax expected to be payable or recoverable in respect of temporary differences between the carrying amount of an asset or liability for accounting purposes and its carrying amount for tax purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered. Deferred tax is not recognised on temporary differences that arise from initial recognition of an asset or liability in a transaction (other than a business combination) that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is calculated using tax rates expected to apply in the periods when the assets will be realised or the liabilities settled, based on tax rates and laws enacted, or substantively enacted, at the Statement of Financial Position date.

e)  Cash and cash equivalents

Cash and cash equivalents comprise cash and demand deposits with banks together with short-term highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.

f)   Financial assets and liabilities

The Company applies IFRS 9 Financial Instruments to the recognition, classification and measurement, and derecognition of financial assets and financial liabilities and the impairment of financial assets.

Recognition

Financial assets are recognised on the balance sheet when, and only when, the Company becomes a party to the contractual provision of the instrument. Where a transfer of a financial asset under IFRS 9 does not qualify for de-recognition, the transferee does not recognise the transferred asset as its asset. The transferee derecognises the cash or other consideration paid and recognises a receivable from the transferor. In relation to the Receivables transferred to the Company, de-recognition is considered to be inappropriate for the Originator's own financial statements as the Originator has retained the significant risks of the Receivables portfolio. The Loan Notes are classified as other financial liabilities and are initially recognised at fair value at the date of issuance of the liability, and are subsequently measured at amortised cost using the effective interest rate method.

Derecognition

Financial assets and liabilities are de-recognised when the rights to receive cash flows from them has expired or where the Company has transferred substantially all the risks and rewards of ownership.

Classification and measurement

Financial assets are classified on the basis of two criteria:

I)          the business model within which financial assets are managed; and

II)          their contractual cash flow characteristics (whether the cash flows represent 'solely payments of principal and interest' (SPPI).

The Company assesses the business model criteria at a portfolio level. Information that is·considered in determining the applicable business model includes (i) policies and objectives for the relevant portfolio, (ii) how the performance and risks of the portfolio are managed, evaluated and reported to management, and (iii) the frequency, volume and timing of sales in prior periods, sales expectation for future periods, and the reasons for such sales.