Financial Assets and Liabilities

Categories of financial assets and financial liabilities

The accounting policies provide a description of each category of financial assets and financial liabilities.

The fair values of financial assets and liabilities are included at the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the end of the reporting period.

The carrying amounts of cash and cash equivalents, finance leases, bank loans, trade and other receivables and trade and other payables is a close approximation of their fair values.

Where financial assets and financial liabilities are measured at fair value, their measurement is classified into the following hierarchy:


•	Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities


•	Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)


•	Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following financial assets and financial liabilities were classified within level 3:



Financial Assets	2018 £’000		2017 £’000
Trade and other receivables	£	52,352	£	41,494
Cash and cash equivalents	15,048		23,571
Total financial assets	£	67,400	£	65,065



Financial liabilities	2018 £’000		2017 £’000
Non-current borrowings	£	20	£	63
Current borrowings	19,744		29,402
Trade and other payables	40,243		24,358
Contingent consideration	12,510		—
Deferred consideration	4,401		—
Other liabilities	277		253
Total financial liabilities	£	77,195	£	54,076

Fair Value Movement of Contingent Consideration



	£’000
Fair value at 1 July 2017	£	—
Arising on acquisition of Velocity Partners	10,933
Movement in fair value recognised in finance cost	126
Foreign exchange recognised in other comprehensive income	255
Fair value at 30 June 2018	£	11,314

The valuation technique used, significant unobservable inputs and inter-relationship between significant unobservable inputs are shown below:



Valuation technique	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fair value measurement
Scenario based discounted cash flow: the valuation model considers the present value of the expected future payments in several probability weighted scenarios, discounted at risk adjusted discount rate.	Expected future cash flows (30 June 2018 - total maximum of £12.1million, minimum of £nil over 3 years) Fair value of ordinary shares (30 June 2018 - $12.79) Discount rate (30 June 2018 - 3%)	The estimated fair value would increase (decrease) if: the expected cash flows were higher (lower); or the fair value of ordinary shares was higher (lower); or the risk-adjusted discount rate were lower (higher)