NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued JUNE 30, 2012 UNAUDITED AND DECEMBER 31, 2011 AUDITED
AND SIX MONTHS PERIOD ENDED JUNE 30, 2012 AND 2011 UNAUDITED Figures in tables are presented in billions of Rupiah, unless otherwise stated
18
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued e. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and in banks and all unrestricted time deposits with maturities of not more than three months from the date of placement.
f. Investments in associated companies
Investments in companies where the Company has 20 to 50 of the voting rights, and through which the Company exerts significant influence, but not control, over the financial and operating
policies are accounted for using the equity method after initially being recognized at cost. Under this method, the Company recognizes the Companys proportionate share in the income or loss
of the associated company from the date that significant influence commences until the date that significant influence ceases. When the Company’s share of loss exceeds the carrying amount of
the associated company, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Company has incurred legal or constructive obligations
or made payments on behalf of the associate.
Investment in joint ventures is accounted by using the equity method whereby the participation in a joint venture initially recorded at cost and subsequently adjusted for changes in the shares of
the venturer of the joint venture’s net assets that occurred after the acquisition.
The Company and its subsidiaries determine at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If in this case, the Company
and its subsidiaries calculate the amount of impairment as the difference between the recoverable amount of the associates and its carrying value and recognises the amount adjacent
to the share of profit loss of associates company in the consolidated statement of comprehensive income.
These assets are included in long-term investments in the consolidated statement of financial position.
The functional currency of PT Pasifik Satelit Nusantara “PSN” and PT Citra Sari Makmur “CSM” is the United States Dollars “U.S. Dollars” and the functional currency of Scicom MSC
Berhad “Scicom” is Malaysian Ringgit “MYR”. For the purpose of reporting these investments using the equity method, the assets and liabilities of these companies as of the statement of
financial position date are translated into Indonesian Rupiah using the rates of exchange prevailing at that date, while revenues and expenses are translated into Indonesian Rupiah at the
average rates of exchange for the period. The resulting translation adjustments are reported as part of “Translation adjustment” in the equity section.
g. Trade and other receivables Trade and other receivables are recognized initially at fair value and subsequently measured at
amortized cost, less provision for impairment. This provision for impairment is made based on management’s evaluation of the collectability of outstanding amounts. Accounts are written off in
the period during which they are determined to be uncollectible.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued JUNE 30, 2012 UNAUDITED AND DECEMBER 31, 2011 AUDITED
AND SIX MONTHS PERIOD ENDED JUNE 30, 2012 AND 2011 UNAUDITED Figures in tables are presented in billions of Rupiah, unless otherwise stated
19
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
h. Inventories Inventories consist of components and modules, which are subsequently expensed or transferred
to property, plant and equipment upon use. Components and modules represent telephone terminals, cables, transmission installation spare parts and other spare parts. Inventories also
include Subscriber Identification Module “SIM” cards, Removable User Identity Module “RUIM” cards, handsets, set top box, wireless broadband modem and prepaid voucher blanks, which are
expensed upon sale. The costs of inventories comprise of the purchase price, import duties, other taxes, transport, handling and other costs directly attributable to the it’s acquisition. Inventories
are stated at the lower of cost and net realizable value. Net realizable value is the estimate of selling price less the costs to sell.
Cost is determined using the weighted average method for components, SIM cards, RUIM cards, handsets, set top box, wireless broadband modem and prepaid voucher blanks, and the specific-
identification method for modules. The amount of any write-down of inventories below cost to net realizable value and all losses of
inventories shall be recognized as an expense in the period in which the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in
net realizable value, shall be recognized as a reduction in the amount of general and administrative expense in the period in which the reversal occurs.
Provision 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. Assets held for sale
Assets or disposals groups are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction rather than through continuing use and a
sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.
Assets that meet the criteria to be classified as held for sale are reclassified from property, plant and equipment and depreciation on such assets is ceased.
k. Intangible assets
Intangible assets comprised of intangible assets from subsidiaries or business acquisitions, licenses 3G and Broadband Wireless Access and computer software. 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
estimate the recoverable value of their intangible assets. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written-down to its estimated recoverable
amount.
