Page 206 - Sigmaroc Annual-Report 2023

SIGMAROC ANNUAL REPORT 2023 FINANCIAL REPORT
Notes to the financial statements
The fair values of various derivative instruments used for hedging purposes are disclosed in Note 33. Movements on the revaluation reserve in shareholders’ equity are shown in Note 30. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability if the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
Impairment of Financial Assets
The Group assesses at the end of each reporting period whether there is the need to recognise loss allowances for expected credit losses on financial assets. These are measured at amortised cost. The Group measures loss allowances at an amount equal to lifetime expected credit losses, except for bank balances for which credit risk has not increased significantly since initial recognition, which are measured as 12-month expected credit loss.
The loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the financial asset’s original effective interest rate.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the Income Statement.
2.10. Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value, which is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
Weighted average cost is used to determine the cost of ordinarily interchangeable items.
2.11. Trade Receivables
Trade receivables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are amounts due from third parties in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables – factoring
The carrying amounts of the trade receivables excludes receivables which are subject to a factoring arrangement. Under this arrangement, the Group has transferred the relevant receivables to the factor in exchange for cash without recourse. Therefore, it doesn’t recognise the transferred assets in their entirety in its balance sheet.
The value of factored receivables at each year end are as follows:
31 December 2023 £’000
31 December 2022 £’000
Total factoring
2.12. Cash and Cash Equivalents
5,004
5,927
Cash and cash equivalents comprise cash at bank and in hand and are subject to an insignificant risk of changes in value.
2.13. Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.14. Reserves
Share Premium – the reserve for shares issued above the nominal value. This also includes the cost of share issues that occurred during the year.
Retained Earnings – the retained earnings reserve includes all current and prior periods retained profit and losses.
Share Option Reserve – represents share options awarded by the Company.
Other Reserves comprise the following:
Capital Redemption Reserve – the capital redemption reserve is the amount equivalent to the nominal value of shares redeemed by the Group.
Foreign Currency Translation Reserve - represents the translation differences arising from translating the financial statement items from functional currency to presentational currency.
Deferred Shares – are shares that effectively do not have any rights or entitlements.
Capital Reserve – represents cash that can be used for future expenses or to offset any capital losses.
Revaluation Reserve – represents the changes of values in certain assets and includes derivative instruments used for cash-flow hedging
2.15. Trade Payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.
2.16. Provisions
The Group provides for the costs of restoring a site where a legal or constructive obligation exists. The estimated future costs for known restoration requirements are determined on a site-by-site basis and are calculated based on the present value of estimated future costs.