PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED continued SEPTEMBER 30, 2007 AND 2008,
AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008 Figures in tables are presented in millions of Rupiah, unless otherwise stated
21
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued g. Trade and other accounts receivable continued
The allowance for doubtful accounts is the Company and its subsidiaries’ best estimate of the probable credit losses in the accounts receivable. The amount of the allowance is recognized in
the consolidated statement of income within operating expenses - general and administrative. The Company and its subsidiaries determine the allowance based on historical write-off
experience. The Company and its subsidiaries review the allowance for doubtful accounts every month. Past due balances over 90 days for retail customers are fully provided, and past due
balance for non-retail customers over a specified amount are reviewed individually for collectibility. Account balances are written off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote.
h. Inventories
Inventories consist of components and modules which are expensed or transferred to property, plant and equipment upon use. Inventories also include Subscriber Identification Module “SIM”
cards, Removable User Identity Module “RUIM” cards and prepaid voucher blanks, which are expensed upon sale. Inventories are stated at the lower of costs or net realizable value.
Cost is determined using the weighted average method for components, SIM card, RUIM card and prepaid voucher blanks, and the specific-identification method for modules.
Allowance for obsolescence is primarily based on the estimated forecast of future usage of these items.
i. Prepaid expenses
Prepaid expenses are amortized over their future beneficial periods using the straight-line method.
j. Intangible assets Intangible assets comprised of intangible assets from subsidiaries and business acquisition and
licenses. Intangible assets shall be recognized if it is probable that the expected future economic benefits that are attributable to each asset will flow to the Company and its subsidiaries and the
cost of the asset can be reliably measured. Intangible assets are stated at cost less accumulated amortization and impairment, if any.
Intangible assets are amortized over their useful lives. The Company and its subsidiaries shall estimate the recoverable value of their intangible asset. When the carrying amount of an asset
exceeds its estimated recoverable amount, the asset is written down to its estimated recoverable amount.
In 2006, Telkomsel was granted the right to operate the 3G license. Telkomsel is required to pay an up-front fee and annual rights of usage “Biaya Hak Penggunaan” or “BHP” fee for the next
ten years. The up-front fee is recorded as intangible asset and amortized using the straight-line method over the term of the right to operate the 3G license 10 years. Amortization commenced
in 2006 when the assets attributable to the provision of the related services became available for use.
PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED continued SEPTEMBER 30, 2007 AND 2008,
AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008 Figures in tables are presented in millions of Rupiah, unless otherwise stated
22
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued j. Intangible assets continued
Based on Telkomsel’s management interpretation of the license conditions and the written confirmation from the DGPT, the license may be returned at any time without any financial
obligation to pay the remaining outstanding annual BHP fees. Accordingly, Telkomsel recognizes the annual BHP fees as expense when incurred.
Telkomsel’s management evaluates its plan to continue to use the license on an annual basis.
k. Property, plant and equipment - direct acquisitions Property, plant and equipment directly acquired are stated at cost, less accumulated depreciation
and impairment losses. Property, plant and equipment, except land, are depreciated using the straight-line method,
based on the estimated useful lives of the assets as follows:
Years
Buildings 20
Switching equipment 5-15
Telegraph, telex and data communication equipment 5-15
Transmission installation and equipment 5-20
Satellite, earth station and equipment 3-15
Cable network 5-15
Power supply 3-10
Data processing equipment 3-10
Other telecommunications peripherals 5
Office equipment 2-5
Vehicles 5-8
Other equipment 5
The Company and its subsidiaries evaluate their property, plant and equipment whenever events and circumstances indicate that the carrying amount of the assets may not be recoverable.
When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written down to its estimated recoverable amount, which is determined based upon the greater of
its net selling price or value in use. The cost of maintenance and repairs is expensed as incurred. Expenditures, which extend the
useful life of the asset or result in increased future economic benefits such as increase in capacity or improvement in the quality of output or standard of performance are capitalized.
When assets are retired or otherwise disposed of, their carrying values and the related accumulated depreciation are eliminated from the consolidated financial statements, and the
resulting gains or losses on the disposal or sale of property, plant and equipment are recognized in the consolidated statement of income.
