PT SUMMARECON AGUNG Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2016 unaudited and December 31, 2015 audited and For the period of six months ended June 30, 2016 and 2015 unaudited
Expressed in thousands of Indonesian Rupiah, unless otherwise stated
37
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED z.
Events after the financial reporting period Post year-end events that provide additional information about the Group’s position at reporting period adjusting
events are reflected in the consolidated financial statements. Post year-end events that are not adjusting events are disclosed in the notes to the consolidated financial statements when material.
3. MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated financial statements require management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of
contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in
future periods. Judgments
In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations and assumptions, which have the most significant effect on the amounts recognized in the
consolidated financial statements:
Revenue recognition
When a contract for the sale of a property upon completion of construction is judged to be a construction contract see revenue recognition policy for sales of property under development, revenue is recognized using the
percentage-of-completion method as construction progress. The percentage of completion is made by reference to the stage of completion of the project or contract, determined based on the proportion of the contract costs incurred
to date to the total estimated costs of the project or contract.
Business combinations
As part of its business strategy, the Company acquires subsidiaries that own real estate. At the time of acquisition, the Company considers whether the acquisition represents the acquisition of a business. The Company accounts
for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property. More specifically, consideration is made of the extent to which significant processes are acquired and, in
particular, the extent of ancillary services provided by the subsidiary e.g., maintenance, cleaning, security, bookkeeping, hotel services, etc.. The significance of any process is judged with reference to the guidance in
PSAK No. 22 Revised 2010 on ancillary services.
When the acquisition of a subsidiary does not represent a business acquisition, it is accounted for as an acquisition of a group of assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based
upon their relative fair values, and no goodwill or deferred tax is recognized.
Classification of property The Group determines whether an acquired property is classified as investment property or property inventory:
- Investment property consists of land and buildings principally offices, commercial warehouse and retail
property which are not occupied substantially for use by, or in the operations of, the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation.
- Property inventory consists of property that is held for sale in the ordinary course of business. Principally, this is
residential property that the Group develops and intends to sell before or on completion of construction. Valuation
of property
The fair value of land and buildings disclosed under the “Fixed assets” and “Investment properties” accounts are determined by independent real estate valuation experts using recognized valuation techniques. These techniques
comprise the cost approach and market and revenue valuation methods.
PT SUMMARECON AGUNG Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2016 unaudited and December 31, 2015 audited and For the period of six months ended June 30, 2016 and 2015 unaudited
Expressed in thousands of Indonesian Rupiah, unless otherwise stated
38
3. MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS CONTINUED
