PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 2006 and 2005 Expressed in rupiah, unless otherwise stated
12
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued h. Prepaid Expenses
Prepaid expenses are amortized over the periods benefited using the straight-line method. The non- current portion of prepaid expenses is shown as part of “Other Non-current Assets” in
the consolidated balance sheets.
i. Fixed Assets
Fixed assets are stated at cost, except for certain assets revalued in accordance with government regulations, less accumulated depreciation, amortization and depletion. Certain machinery and
equipment related to the production of cement are depreciated using the unit-of-production method, while all other fixed assets are depreciated using the straight-line method based on their estimated
useful lives as follows:
Years Land improvements; quarry; and buildings and structures
8 - 30 Machinery and equipment
5 - 10 Leasehold improvements; furniture, fixtures and office
equipment; and tools and other equipment 5
Transportation equipment 5
Land is stated at cost and is not depreciated. Construction in progress is stated at cost including capitalized interest - see following item “l”. Cost
is reduced by the amount of revenue generated from the sale of finished products during the trial production run less the related cost of production. The accumulated cost will be reclassified to the
appropriate fixed assets account when the construction is substantially completed and the constructed asset is ready for its intended use.
The costs of maintenance and repairs are charged to operations as incurred; significant renewals and betterments which meet the capitalization criteria under PSAK No. 16, “Fixed Assets”, are
capitalized. When assets are retired or otherwise disposed of, their carrying values and the related accumulated depreciation, amortization or depletion are removed from the accounts, and
any resulting gains or losses are credited or charged to current operations.
j. Impairment of Assets
The recoverable amount of an asset is estimated whenever events or changes in circumstances indicate that its carrying amount may not be fully recoverable. Impairment in asset value, if any, is
recognized as a loss in the current year’s statement of income.
k. Leases
Lease transactions are accounted for under the capital lease method when the required capitalization criteria under PSAK No. 30, “Accounting for Leases”, are met. Otherwise, lease
transactions are accounted for under the operating lease method. Assets under capital lease presented as part of “Fixed Assets” in the consolidated balance sheets are recorded based on the
present value of the lease payments at the beginning of the lease term plus residual value option price to be paid at the end of the lease period. Depreciation of leased assets is computed based on
the methods and estimated useful lives used for similar fixed assets acquired under direct ownership.
Gain on sale-and-leaseback transactions is deferred and amortized using the same basis and methods as mentioned above.
Obligations under capital lease are presented at the present value of the remaining lease payments to be made.
PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 2006 and 2005 Expressed in rupiah, unless otherwise stated
13
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued l. Capitalization of Borrowing Costs
