PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 2005 and 2004 Expressed in rupiah, unless otherwise stated
14
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued l. Capitalization of Borrowing Costs
In accordance with revised PSAK No. 26, “Borrowing Costs”, interest charges and foreign exchange differences incurred on borrowings and other related costs to finance
the construction or installation of major facilities are capitalized. Capitalization of these borrowing costs ceases when the construction or installation is completed and the related asset is ready for its
intended use. In 2005 and 2004, no borrowing costs were capitalized.
m. Deferred Charges
In accordance with PSAK No. 47, “Accounting for Land”, costs incurred in connection with the acquisitionsrenewal of landrights, such as legal fees, land remeasurement fees, notarial fees, taxes
and other expenses, are deferred and amortized using the straight-line method over the legal terms of the related landrights.
n. Revenue and Expense Recognition
Revenues are recognized when the products are delivered and the risks and benefits of ownership are transferred to the customers andor when the services are rendered. Cost and expenses are
generally recognized and charged to operations when they are incurred.
o. Provision for Employee Benefits
The Company has a defined contribution retirement plan Pension Plan covering all of its qualified permanent employees and an unfunded employee benefit liability in accordance with the existing
Company’s Collective Labor Agreement CLA. The provision for the CLA has been calculated by comparing the benefit that will be received by an employee at normal pension age from the Pension
Plan with the benefit as stipulated in the CLA after deducting the accumulated employee contribution and the related investment results. If the employer-funded portion of the Pension Plan
benefit is less than the benefit as required by the CLA, the Company provides for such shortage. Prior to January 1, 2004, the Company determined its employee benefit liability under the CLA
based on an actuarial valuation and amortized unrecognized past service costs over the estimated average remaining years of service of qualified employees.
On the other hand, the Subsidiaries do not maintain any pension plan for the benefit of their employees. However, retirement benefit expenses for those Subsidiaries are accrued based on
Labor Law No. 132003 dated March 25, 2003 “the Law”.
Effective January 1, 2004, the Company decided to early adopt PSAK No. 24 Revised 2004 - Employee Benefits, on a retrospective basis and changed its previous accounting method for
employee benefits to the method required under this revised PSAK.
Under PSAK No. 24 Revised 2004, the cost of providing employee benefits under the CLALaw is determined using the projected unit credit actuarial valuation method. Actuarial gains and losses are
recognized as income or expense when the net cumulative unrecognized actuarial gains and losses for each individual plan at the end of the previous reporting year exceeds the higher of 10 of the
present value of defined benefit obligation and the fair value of plan assets at that date. These gains or losses are amortized on a straight-line basis over the expected average remaining working lives
of the employees. Further, past service costs arising from the introduction of a defined benefit plan or changes in the benefit payable of an existing plan are required to be amortized over the period
until the benefits concerned become vested.
PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 2005 and 2004 Expressed in rupiah, unless otherwise stated
15
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
