b'90 Mercia Asset Management PLC Annual Report and Accounts 2021Notes to the consolidated financial statements continued1. Accounting policies continuedFinancial instruments continuedDerecognition of financial assetsThe Group derecognises a financial asset when the contractual rights to receive the cash flows from the asset expire. On derecognition of a financial asset in its entirety, the difference between the assets fair value and the sum of the consideration received is recognised as a realised gain or loss on disposal of investment in the income statement.Financial liabilities and equity instrumentsFinancial liabilitiesCurrent financial liabilities are composed of trade payables and other short-term monetary liabilities, which are recognised at amortised cost.Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised as the proceeds received, net of direct issue costs. Repurchase of the Companys own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Companys own equity instruments.ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable thatthe Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.Cash, cash equivalents and short-term liquidity investmentsCash and cash equivalents include cash in hand, deposits held with banks and other short-term highly liquid investments with original maturities of less than three months. Short-term liquid investments with a maturity of over three months and less than 12months are included in a separate category, short-term liquidity investments.Share-based paymentsEquity-settled share-based payments to Executive Directors and certain employees of the Group, whereby recipients render services in exchange for shares or rights over shares, are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 6 to these consolidated financial statements.The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the Groups estimate of the equity instruments that will eventually vest. At each balance sheet date, the Group reviews its estimate.The impact of any revision to the previous estimate is recognised in the income statement, such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity.Segmental reportingAn operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entitys Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments are aggregated into reporting segments where they share similar economic characteristics. Note 3 to these consolidated financial statements gives further details on the Groups segmental reporting.'