Financial Instrument ASA Partners Holding Ltd Trident Chambers, PO BOX 146

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

d. Revenue and Expenses Recognition

Revenue is recognized to the extent when it is probable that the economic benefits will flow to the Company and its Subsidiaries and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: • Sale of goods Revenue is recognized when the significant risk and rewards of ownership of the goods have been passed to the buyer. • Rendering of services Revenue is recognized by reference to the stage of completion of the transaction at balance sheet dates and there is no significant uncertainties remain considering any associated cost. • Interest Income is recognized as the interest accrues taking into account the effective yield on the related asset, unless collectability is in doubt. • Expenses are recognized when incurred accrual basis.

e. Cash and Cash Equivalents

Cash on hand and in banks and short-term deposits held to maturity are carried at cost. Cash and cash equivalents are defined as cash on hand and in banks, demand deposits and short-term and highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purposes of the consolidated statements of cash flows, cash and cash equivalents consist of cash on hand and in banks, and short-term deposits with maturities of less than three months.

f. Investments

Short-term deposits with maturities of less than three months but held for collateral or have a restriction and short-term deposits with maturities of more than three months are presented as short-term investments and carried at nominal value. Investments in securities are classified as follows: i Held for trading Investments, which are classified as “held for trading” are measured at fair value, with unrealized gain or losses as a result of an increase or decrease of the fair value are reported in the current period profit and loss statement. The difference between sales proceed and the carrying amount are recognized as realized gains or losses. ii Available for sale Investments which are classified as “available for sale” are measured at fair value. The unrealized gains or losses as a result of an increase or decrease of the fair value are reported as a separate component of equity. The differences between sales proceed and the carrying amount are recognized as gains or losses when the investment is sold, collected or otherwise disposed of. Unrealized gains and losses from this investment at which time the cumulative gain or loss previously reported in equity are recognized as income or expenses when realized. iii Held to maturity Investments which are intended to be held to maturity, such as bonds, are measured at the acquisition cost after un- amortized premium purchase or discount. Discount and premium is amortized using the straight-line method. When there is a permanent decline of fair value below the carrying value, the impairment in value is reported in the current period profit and loss statement. Investment in shares in other companies with the percentage of ownership as follows: • Less than 20 is stated at the lower of cost or net realizable value. • From 20 to 50 is stated at cost and will be increased or decreased by the portion of income loss resulting from associated companies and the dividend received is deducted from the investment amount equity method. • More than 50 is consolidated.

g. Financial Instrument

Effective on January 1, 2010, the Company and its Subsidiaries have adopted PSAK 50 revised 2006, Financial Instruments: Presentation and Disclosure, and PSAK 55 Revised 2006, Financial Instruments: Recognition and Measurement, which replaces PSAK 50, Accounting for Certain Investments in Securities and PSAK 55 revised 1999, Accounting for Derivative Instruments and Hedging Activities. PSAK 50 Revised 2006, contains requirements for the presentation of financial instruments and identifies the information that should be disclosed. Disclosure requirements apply to the classification of financial instruments, from the perspective of the issuer, in financial assets, financial liabilities and equity instruments; classification related to interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be offset. This PSAK requires disclosure of, among other things, information regarding factors that affect the amount, timing and certainty of future cash flows of an entity associated with financial instruments and the accounting policies applied to those instruments. PSAK 55 revised 2006 set the basic principles for recognizing and measuring financial assets, financial liabilities and some non-financial items buying or selling contracts. This PSAK, among others, provides definitions and characteristics of derivatives, the categories of financial instruments, recognition and measurement, hedge accounting and the establishment of a hedging relationship. Financial Assets • Initial recognition Financial assets within the scope of PSAK 55 Revised 2006 are classified as financial assets measured at fair value through profit and loss, loans and receivables, held to maturity investments or financial assets available for sale, whichever is appropriate. The Company and its Subsidiaries determine the classification of financial assets at initial recognition and, where allowed and appropriate, re-evaluate the classification of those assets at the end of each financial period. Financial assets of the Company and its Subsidiaries include cash and cash equivalents, account receivable and other receivables, financial instruments that do not have the quotation, and current financial assets and other non-current. • Measurement after initial recognition The Company and its Subsidiaries classifies its financial assets in the category loans and receivables. The classification depends on the purpose for which the financial assets were acquired and determined at initial recognitions. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determined term of payments that are not quoted in an active market. Loan and receivables are initially recognised at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method. Financial Liabilities • Initial recognition Financial liabilities within the scope of PSAK 55 revised 2006 could be classified as financial liabilities measured at fair value through profit and loss, loans and debt, or derivatives that are designated as hedging instruments in an effective hedge, whichever is appropriate. The Company and its Subsidiaries determine the classification of their financial liabilities at the time of initial recognition. Financial liabilities at initial recognition are recognized at fair value. In the case of financial liabilities not measured at fair value through income statement, the fair value plus transaction costs that are directly attributable to the acquisition or issuance of these financial liabilities. Financial liabilities of the Company and its Subsidiaries include trade account payables and other payables, accrued expenses, long-term debt, payable to related parties, and other current and non-current financial liabilities. 02 02 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2010 and 2009 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2010 and 2009 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated PT. ERATEX DJAJA Tbk 2010 Annual Report 037 036 PT. ERATEX DJAJA Tbk 2010 Annual Report SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

g. Financial Instrument continued Financial Liabilities continued