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
