Annual Report and Accounts 2010

18Financial instruments

(a) Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:

Financial assets

	Loans and receivables £000	Assets at fair value through the income statement £000	Available- for-sale £000	Total £000
At 31 December 2010
Cash and cash equivalents	29,363	−	−	29,363
Short-term deposits	247,466	−	–	247,466
Embedded derivatives	−	2,303	−	2,303
Accounts receivable (gross of impairment provision)	107,759	−	−	107,759
Total current financial assets	384,588	2,303	–	386,891
Available-for-sale investments – unlisted	−	−	20,329	20,329
Long-term deposits	15,000	−	–	15,000
Loans and receivables	1,934	−	−	1,934
Total non-current financial assets	16,934	−	20,329	37,263
Total financial assets	401,522	2,303	20,329	424,154
At 31 December 2009
Cash and cash equivalents	34,489	−	−	34,489
Short-term deposits	105,524	−	–	105,524
Short-term marketable securities	−	−	1,795	1,795
Embedded derivatives	−	2,480	−	2,480
Currency exchange contracts	−	457	−	457
Accounts receivable (gross of impairment provision)	67,642	−	−	67,642
Total current financial assets	207,655	2,937	1,795	212,387
Non-current available-for-sale investments – unlisted	−	−	9,432	9,432
Total financial assets	207,655	2,937	11,227	221,819

Financial liabilities

	2010 £000	2009 £000
Liabilities at amortised cost at 31 December:
Accounts payable	4,305	2,280
Accrued and other liabilities	41,789	29,577
	46,094	31,857
Liabilities at fair value through the income statement at 31 December:
Currency exchange contracts	201	−
Total financial liabilities	46,295	31,857

Loans and receivables

During 2010 the Group invested £2.5 million in an interest-free charitable bond with Future Business. This has been recognised in loans and receivables at its initial fair value of £1,934,000, measured using the effective interest method, which resulted in a charge of £566,000 being recognised as interest payable and similar charges.

Short-term deposits The effective interest rate on short-term deposits outstanding at the year-end was 1.78% (2009: 1.92%) and these deposits have an average maturity of 159 days (2009: 126 days).

Long-term deposits The effective interest rate on long-term deposits outstanding at the year-end was 2.53% and these deposits have an average maturity of 543 days.

(b) Credit quality of financial assets

Trade debtors

On a quarterly basis, all trade debtors more than three months overdue are considered for impairment on a line-by-line basis. Either a provision is made or the lack thereof is justified, with review by senior members of the Group’s finance team.

	2010 £000	2009 £000
Trade debtors (gross of impairment provision):
Not yet due	66,012	30,255
Under 90 days overdue	27,260	18,922
Over 90 days overdue but not provided for	3,705	3,717
Fully provided for	2,091	2,395
Total	99,068	55,289

As shown above, at 31 December 2010 trade debtors less than 90 days overdue amounted to £27.3 million. Of those outstanding at 31 December 2010, £12.4 million had been collected by 25 February 2011 and £13.8 million were owed by large, established customers. Similarly, debtors more than 90 days overdue and not provided for amounted to £3.7 million of which £1.5 million had been collected by 25 February 2011 and £1.6 million was owed by large, established customers. For the remainder, discussions regarding repayment are ongoing and repayment schedules have been agreed with the customers concerned. These will be monitored on a quarterly basis in accordance with the control outlined above. No further analysis has been provided here on the quality of these debts as they are not felt to pose a material threat to the Group’s future results.

As shown above, at 31 December 2010, trade debtors fully provided for amounted to £2.1 million (2009: £2.4 million). Of those provided for at 31 December 2010, £nil relates to trade debtors that are between three and six months overdue (2009: £0.2 million) and £2.1 million relates to trade debtors that are over six months overdue (2009: £2.2 million).

Highly liquid financial assets

As at 31 December 2010, 97% (2009: 91%) of the Group’s cash and cash equivalents, short- and long-term deposits and marketable securities were held with institutions that had either an AA rating or, in the case of UK building societies, had over £1 billion in assets.