Deferred charges - land rights

PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2013 and for the Year Then Ended Figures in tables are expressed in billions of rupiah, unless otherwise stated 29 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued r. Revenue and expense recognition continued v. Revenues from network Revenues from network consist of revenues from leased lines and satellite transponder leases which are recognized over the period in which the services are rendered. vi. Other telecommunications service revenues Revenues from other telecommunications services consist of Revenue-Sharing Arrangements “RSA” and sales of other telecommunication services or goods. The RSA are recorded in a manner similar to capital leases where the property and equipment and obligation under RSA are reflected in the consolidated statement of financial position. All revenues generated from the RSA are recorded as a component of revenues, while a portion of the investors’ share of the revenues from the RSA is recorded as finance costs with the balance treated as a reduction of the obligation under RSA. Universal Service Obligation “USO” compensation from construction activities to design, build and finance assets for the grantor is recognized on the stage of completion basis. Revenues from operating and maintenance activities in respect of the assets under the concession are recognized when the services are rendered. In concession contract under USO, the Company and subsidiaries have contractual rights to receive considerations from the grantor. The Company and subsidiaries recognize a financial asset in their consolidated statement of financial position, in consideration for the services they provide designing, building, operation or maintenance of assets under concession. Such financial assets are recognized in the consolidated statement of financial position as Accounts Receivable, for the amount of fair value of the infrastructure on initial recognition and subsequently at amortized cost. The receivable is settled by means of the grantor’s payments received. The financial income calculated on the basis of the effective interest rate is recognized as finance income. Revenues from sales of other telecommunication services or goods are recognized upon completion of services and or delivery of goods to customers. vii. Multiple-element arrangements Where two or more revenue-generating activities or deliverables are sold under a single arrangement, each deliverable that is considered to be a separate unit of accounting is accounted for separately. The total revenue is allocated to each separately identifiable component based on the relative fair value of each component and the appropriate revenue recognition criteria are applied to each component as described above. viii. Agency relationship Revenues from an agency relationship are recorded based on the gross amount billed to the customers when the Company and subsidiaries act as principal in the sale of goods and services. Revenues are recorded based on the net amount retained the amount paid by the customer less amount paid to the suppliers because in substance, the Company and subsidiaries act as agents and earned commission from the suppliers of the goods and services sold. PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2013 and for the Year Then Ended Figures in tables are expressed in billions of rupiah, unless otherwise stated 30 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued r. Revenue and expense recognition continued ix. Customer loyalty programme The Company and subsidiaries operate a loyalty point programme, which allows customers to accumulate points for every certain multiple of the usage of telecommunication services. The points can then be redeemed in the future for free or discounted products, provided other qualifying conditions are achieved. Consideration received is allocated between the telecommunication services and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points is determined based on historical information about redemption rate of award points, Fair value of the points issued is deferred and recognized as revenue when the points are redeemed or expired. x. Service concession arrangements The Company and subsidiaries have implemented ISAK 16,” Service Concession Arrangements”, which is effective starting on January 1, 2012. Based on ISAK 16, revenues relating to construction or upgrade services under a service concession arrangement are recognized based on the stage of completion of the work performed. Operation or service revenue is recognized in the period in which the service is provided. When more than one service is provided in the service concession arrangements, the consideration received is allocated by reference to the relative value of the services. Further, the developed infrastructure assets under these arrangements are not recognized as property and equipment of the operator, because the contractual arrangements do not convey the right to control the use of the public services infrastructure assets to the operator. xi. Expenses Expenses are recognized as they are incurred.

s. Employee benefits

i. Short-term employee benefits All short-term employee benefits which consist of salaries and related benefits, vacation pay, incentives and other short-term benefits are recognized as expense on undiscounted basis when employees have rendered service to the Company and subsidiaries. ii. Pension and post-retirement health care benefit plans The net obligations in respect of the defined pension benefit and post-retirement health care benefit plans are calculated at the present value of estimated future benefits that the employees have earned in return for their service in the current and prior periods, less the fair value of plan assets and as adjusted for unrecognized actuarial gains or losses and unrecognized past service cost. The calculation is performed by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currencies in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement benefit obligation. Government bonds are used as there is no deep market for high quality corporate bonds.