Schedule 515 PT BAYAN RESOURCES AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 MARCH 2008 AND 2007 AND 31 DECEMBER 2007, 2006 AND 2005
Expressed in million Indonesian Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued j. Deferred exploration and development expenditures
Exploration expenditure incurred is capitalised and carried forward, on an area of interest basis, provided one of the following conditions is met:
i Such costs are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale; or
ii Exploration activities in the area of interest have not yet reached the stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active
and significant operations in or in relation to the area are continuing. Ultimate recoupment of exploration expenditure carried forward is dependent upon successful
development and commercial exploitation, or alternatively, sale of the respective area. Each area of interest is reviewed at the end of each accounting period. Exploration expenditure in respect of an area of interest, which
has been abandoned, or for which a decision has been made by the Group’s directors against the commercial viability of the area of interest are written-off in the period the decision is made.
Mine development expenditure and incorporated costs in developing an area of interest prior to commencement of operations in the respective area, as long as they meet the criteria for deferral, are capitalised.
Deferred exploration and development expenditure represents the accumulated costs relating to general investigation, administration and licensing, geology and geophysics expenditures and costs incurred to develop a
mine before the commencement of the commercial operations. Deferred exploration and development expenditure is amortised over mine life using the straight line
method from the commencement of commercial production, as appropriate. Interest and other borrowing costs, such as discount fees on loans either directly or indirectly used in
financing exploration and development activities, as long as they meet the criteria for deferral, are capitalised up to the date when the exploration and development activities are complete. For borrowings directly attributable to
a specific activity, the amount to be capitalised is determined as the actual borrowing costs incurred during the period, less any income earned on the temporary investment of such borrowings. For borrowings that are not
directly attributable to a specific activity, the amount to be capitalised is determined by applying a capitalisation rate to the amount expended on the exploration and development activities. The capitalisation rate is the
weighted-average of the borrowing costs applicable to the total borrowings outstanding during the period, excluding borrowings directly attributable to financing the relevant exploration and development activities.
k. Impairment of long lived assets
At balance sheets date, the Group undertakes a review to determine whether there is any indication of asset impairment.
Fixed assets and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which an asset’s carrying amount exceeds its recoverable amount, which is the higher of an asset’s net selling price or value in use. For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable cash flows. Reversal of an impairment provision is recorded as income in the period when the reversal occurs.
F-32
Schedule 516 PT BAYAN RESOURCES AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 MARCH 2008 AND 2007 AND 31 DECEMBER 2007, 2006 AND 2005
Expressed in million Indonesian Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued l. Employee benefits
i Post-retirement benefit obligations A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided,
usually as a function of one or more factors such as age, years of service or compensation. The Group is required to provide a minimum amount of pension benefits in accordance with Labour
Law No. 132003 or the Group’s regulation “Regulation”, whichever is higher. Since the Labour Law and the Regulation set the formula for determining the minimum amount of benefits, in substance pension plans under
the Labour Law or the Regulation represent defined benefit plans. The provision is determined by periodic actuarial calculations.
The liability recognised in the balance sheets in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the balance sheet date, together with adjustments for unrecognised
actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by independent actuaries 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 high quality corporate bonds that are denominated in the currency in which
the benefit will be paid, and that have terms to maturity approximating the terms of the related pension liability. Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and
amendments to the pension plan. When exceeding 10 of the present value of the defined benefit at balance sheet date, are charged or credited to income or expense over the average remaining service lives of the related
employees.
ii Termination benefits Termination benefits are payable whenever an employee’s employment is terminated before the normal
retirement date. The Group recognises termination benefits when it is demonstrably committed to terminate the employment of current employees according to a detailed formal plan with a low possibility of withdrawal.
m. Revenue and expense recognition
Revenue represents revenue earned from the sale of the Group’s products, and delivery of coal handling services, share of port charges, mining services, profit sharing from proceeds on the sale of coal and rental
income. Revenue from sales of coal is recognised when there has been a passing of risk to the customers, and:
‰ It is probable that economic benefits associated with the transaction will flow to the Group; ‰ The quantity and quality of the product can be determined with reasonable accuracy;
‰ The product has been dispatched to the customer and is no longer under the physical control of the Group or property in the product has earlier passed to the customer; and
‰ The selling price and related costs can be determined with reasonable accuracy. Revenue from services is recognised when services are rendered to the customers.
Expenses are recognised as incurred on the accrual basis. F-33
