Environmental Measurements Limited

Basic financial instruments are recognised at amortised cost, except for investments in

non-convertible preference and non-puttable ordinary shares which are measured at fair value, with

changes recognised in profit or loss.

Derivative financial instruments are initially recorded at cost and thereafter at fair value with changes

recognised in profit and loss.

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on timing differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable timing differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible timing differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors. The measurement of deferred tax liabilities and assets reflect the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current or deferred tax for the year is recognised in profit or loss, except when they related to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively.

A defined contribution plan is a pension plan under which fixed contributions are paid into a pension

fund and the company has no legal or constructive obligation to pay further contributions even if the

fund does not hold sufficient assets to pay all employees the benefits relating to employee service in

the current and prior periods.

Contributions to defined contribution plans are recognised as employee benefit expense when they

are due. If contribution payments exceed the contribution due for service, the excess is recognised as

a prepayment.

Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash

or other resources received or receivable, net of the direct costs of issuing the equity instruments. If

payment is deferred and the time value of money is material, the initial measurement is on a present

value basis.

Expenditure on research and development is written off against profits in the year in which it is

incurred.