PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 512
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013
Expressed in thousands of US Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
g.
Inventories
Coal inventories are stated at the lower of cost or net realisable value. Cost is determined based on the weighted average method which includes mining costs, direct labor costs, other direct costs and an appropriate portion of fixed
and variable overheads related to mining operations. It excludes borrowing costs. The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs
necessary to make the sale.
Spare parts, fuel, lubricants, tools and supplies are valued at cost less a provision for obsolete and slow moving inventory. Cost is determined based on the weighted average method. A provision for obsolete and slow moving
inventory is determined on the basis of estimated future usage or sale of individual inventory items. Supplies of maintenance materials are charged to production costs in the period in which they are used.
h. Financial assets
h.1. Classifications, recognition and measurement
The Group classifies its financial assets in the following categories: i fair value through profit or loss, ii held- to-maturity investments, iii loans and receivables, and iv available-for-sale. The classification depends on the
purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
As at 31 December 2014, the Group only has financial assets classified as loans and receivables 31 December 2013: loans and receivables and derivative financial instrument - cash flow hedge.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months
after the end of the reporting year. These are classified as non-current assets. The Group’s loans and receivables comprise cash and cash equivalents, restricted cash in bank and time deposits, trade receivables, other
receivables, loans to third parties and loan to a related party.
Loans and receivables are initially recognised at fair value including directly attributable transaction costs and are subsequently carried at amortised cost using the effective interest method.
Refer to Note 2i for the Group’s accounting policy on derivative financial instruments.
h.2. Derecognition
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.
h.3. Offsetting financial instruments
Financial assets and liabilities are offset and their net amounts are reported in the consolidated statements of financial position when there is a legally enforceable right to offset the recognised amounts and there is an
intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
h.4. Impairment of financial assets carried at amortised cost
At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment
losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset a “loss event” and that loss event or events has an impact on the
estimated future cash flows of the financial asset or a group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter
bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.
164
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 513
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013
Expressed in thousands of US Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
h.
Financial assets continued h.4. Impairment of financial assets carried at amortised cost continued
For the loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flow excluding future credit losses that have
not yet been incurred discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan has a floating interest rate,
the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value
using an observable market price.
If, during a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised such as an improvement in the debtor’s
credit rating, the reversal of the previously recognised impairment loss is recognised in profit or loss.
i. Derivative financial instruments and hedging activities
