PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Six months ended June 30, 2007 and 2006 Expressed in rupiah, unless otherwise stated
11
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued b. Principles of Consolidation continued
In compliance with PSAK No. 38 Revised 2004, “Accounting for Restructuring of Entities under Common Control”, the differences between the costproceeds of net assets acquireddisposed of in
connection with restructuring transactions among entities under common control and their net book values are recorded and presented as “Differences Arising from Restructuring Transactions Among
Entities under Common Control” under the Shareholders’ Equity section of the consolidated balance sheets. This PSAK also provides for the realization of the restructuring differences to current year
operation if the conditions stated in the PSAK are fulfilled.
In compliance with PSAK No. 40, “Accounting for Changes in the Value of Equity of a Subsidiary Associated Company”, the differences between the carrying amount of the Company’s investment
in, and the value of the underlying net assets of, the subsidiaryinve stee arising from changes in the latter’s equity which are not resulting from transactions between the Company and the concerned
subsidiaryinvestee, are recorded and presented as “Differences Arising from Changes in the Equity of Subsidiaries” under the Shareholders’ Equity section of the consolidated balance sheets.
Accordingly, the resulting difference arising from the change in the equity of PT Indomix Perkasa in connection with its application of the provisions of PSAK No. 50, “Accounting for Investments in
Certain Securities”, is recorded and presented under this account see item d below.
c. Cash Equivalents
Time deposits and other short-term investments with maturities of three months or less at the time of placement or purchase and not pledged as collateral for loans and other borrowings are
considered as “Cash Equivalents”.
d. Short-term Investments
Investments in equity securities listed on the stock exchanges are classified as “Short-term Investments”.
Equity securities classified as available-for-sale are stated at market values. Any unrealized gains or losses on appreciationdepreciation in market values of the equity securities are recorded and
presented as part of “Unrealized GainsLosses on Available-for-Sale Securities” under the Shareholders’ Equity section of the consolidated balance sheets. These are credited or charged to
operations upon realization.
When a decline in the fair value of an available -for-sale equity securities has been recognized directly to equity and there is objective evidence that the equity securities are impaired, the
cumulative losses that had been recognized directly in equity are removed from equity and recognized in profit and loss even though the equity securities have not been derecognized.
e. Allowance for Doubtful Accounts
Allowance for doubtful accounts is provided based on a review of the status of the individual receivable accounts at the end of the year.
f. Transactions with Related Parties
The Company and Subsidiaries have transactions with certain parties which have related party relationships as defined under PSAK No. 7, “Related Party Disclosures”.
All significant transactions and balances with related parties, whether or not conducted using terms and conditions similar to those granted to third parties, are disclosed in Note 2 3 .
PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Six months ended June 30, 2007 and 2006 Expressed in rupiah, unless otherwise stated
12
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
g. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using the
weighted average method, except for spare parts which use the moving average method. Allowance for inventory losses is provided to reduce the carrying value of inventories to their net
realizable value.
Net realizable value is the estimated selling price in the ordinary course of business less estimated cost of completion and estimated cost necessary to make the sale.
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-o f-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. 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 d epreciation, 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
