b'Annual Report & Accounts 2022 Mercia Asset Management PLC 81Business combinationsThe Group accounts for business combinations using the acquisition method from the date that control is transferred to the Group. Both the identifiable net assets and the consideration transferred in the acquisition are measured at fair value with transaction costs expensed as incurred. Goodwill arising on acquisitions is tested annually for impairment. Deferred consideration payable to the vendors is measured at fair value at acquisition and assessed annually with particular reference to the conditions upon which the consideration is contingent.Direct investmentsInvestments that are held as part of the Groups investment portfolio are carried at fair value even though the Group may have significant influence over those companies. The Group does not consolidate or apply IFRS 3 to subsidiaries held as direct investments as a result of applying the Investment Entity exemption in compliance with IFRS 10. Direct investments held are measured at fair value through profit or loss in accordance with IFRS 9 Financial Instruments, with changes in fair value recognised in the relevant period. New standards, interpretations and amendments effective in the current financial year Financial statementsNo new standards, interpretations and amendments effective in the year have had a material effect on the Groups financial statements.New standards, interpretations and amendments not yet effectiveNo new standards, interpretations and amendments not yet effective are expected to have a material impact on the Groups future financial statements.Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of VAT. All revenue from services is generated within the United Kingdom. Revenue is recognised when the Group satisfies its performance obligations, in line with IFRS 15. Revenue from services comprises:Fund management feesFund management fees are generally earned as a fixed percentage of FuM and are recognised as the related services are provided, as performance obligations are met. Cash receipts in relation to revenues earned are generally received shortly after the start of the relevant invoicing period.Initial management feesInitial management fees are generally earned as a fixed percentage of the amounts invested by the Group in recognition of the work involved in each investment round. These one-off payments made by the investee company are recognised when the performance obligation of providing those services is satisfied at a point in time, being upon completion of the investment. Cash receipts in relation to revenues earned are generally received shortly after completion of the relevant investment.Portfolio directors feesPortfolio directors fees are earned either as a percentage of the amounts invested by the Group or as a fixed amount. These are usually annual fees, typically charged quarterly in advance to the investee company. They are distinct and separable from annual fund management fees and initial management fees. Amounts invoiced are recorded as deferred income, included in current liabilities and then recognised in the consolidated statement of comprehensive income over the contractual period for which the related services are provided, as performance obligations are met. Cash receipts in relation to revenues earned are generally received shortly after the start of the relevant invoicing period.Share offer feesShare offer fees are typically earned from managed funds on a percentage of funds raised basis. They are recognised in the consolidated statement of comprehensive income upon completion of the fundraising as the performance obligation is met. Cash receipts are received upon the allotment of shares to investors. Costs associated with the fundraising are recognised in the consolidated statement of comprehensive income within administrative expenses when incurred.'