These consolidated financial statements are originally issued in Indonesian language.
PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002 Expressed in rupiah, unless otherwise stated
14
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued o. Retirement Benefits continued
Non-vested past service costs were deferred and amortized over the estimated average remaining years of service of qualified employees, while current service costs are charged directly to
operations of the current year.
Prior to January 1, 2003, the Company and Subsidiaries recognized employee service entitlement liabilities in accordance with the Ministry of Manpower Decree No. Kep-150Men2000 Kep-150
regarding the settlement of work dismissal and determination of separation, gratuity and compensation payments by companies. On March 25, 2003, Labor Law No. 13 Law No. 132003
was signed by the President of the Republic of Indonesia and its effects have been reflected in the 2003 consolidated financial statements.
p. Foreign Currency Transactions and Balances
Transactions involving foreign currencies are recorded in rupiah at the middle rates of exchange prevailing at transaction date. At balance sheet date, monetary assets and liabilities denominated
in foreign currencies are adjusted to reflect the rates of exchange prevailing at the last banking transaction date of the year, as published by Bank Indonesia. The resulting gains or losses are
credited or charged to current operations, except for those capitalized under PSAK No. 26.
As of December 31, 2003 and 2002, the rates of exchange used are as follows:
2003 2002
Euro EUR
1 10,643.06
9,369.58 U.S. dollar US 1
8,465.00 8,940.00
Japanese yen JP¥ 100 7,916.77
7,539.54 Transactions in other foreign currencies are considered insignificant.
q. Derivative Instruments PSAK No. 55, “Accounting for Derivative Instruments and Hedging Activities”, establishes the
accounting and reporting standards requiring that every derivative instrument including certain derivatives embedded in other contracts be recorded on the balance sheet as either an asset or
liability measured at its fair value. PSAK No. 55 requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedges allow a derivative’s gain or loss to
offset related results on the hedged item in the statement of income. PSAK No. 55 also requires that an entity formally document, designate, and assess the effectiveness of transactions that are
accounted for under the hedge accounting treatment.
The accounting for changes in the fair value of a derivative depends on the documented use of the derivative and the resulting designation. The Company has entered into forward currency contracts
to hedge market risks arising from fluctuations in exchange rates relating to its foreign currency denominated loans. However, based on the specific requirements for hedge accounting under
PSAK No. 55, the said instruments do not qualify and are not designated as hedge activities for accounting purposes and accordingly, changes in the fair value of such instruments are recorded
directly in earnings.
These consolidated financial statements are originally issued in Indonesian language.
PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002 Expressed in rupiah, unless otherwise stated
15
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued r. Income
