NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
continued
DECEMBER 31, 2011 AND 2010, AND YEARS ENDED DECEMBER 31, 2011 AND 2010
Figures in tables are presented in billions of Rupiah, unless otherwise stated
108
44. FINANCIAL RISK MANAGEMENT continued
e. Liquidity risk Liquidity risk arises in situations where the Company and its subsidiaries have difficulties in
fulfilling financial liabilities when they become due. Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents in
order to fullfil the Company and its subsidiaries’ financial liabilities. The Company and its subsidiaries continuously perform an analysis to monitor financial position ratios, among other
things, liquidity ratios, debt equity ratios against debt covenant requirements.
Fair value of financial assets and liabilities
Fair value is the amount for which an asset could be exchanged, or liability settled, in an arms-length transaction.
The table below sets out the carrying amount and fair value of those financial assets and liabilities not presented on the Company’s consolidated statement of financial positions at their fair values:
December 31, 2011 Carrying value
Fair value
Two step loans 2,284
2,357 Bonds and notes
3,786 3,974
Bank loans 11,191
11,325 The Company and its subsidiaries consider the fair value of current financial assets and liabilities
approximates their carrying amount, as the impact of discounting is not significant. The fair values of long-term liabilities are estimated by discounting the future cash flows of each liability at rates
currently offered to the Company and its subsidiaries for similar debts of comparable maturities by the bankers of the Company and its subsidiaries, except for bonds which are based on market
prices.
45. CAPITAL MANAGEMENT
The capital structure of the Company and its subsidiaries is as follows:
2011 2010
Amount Portion
Amount Portion
Short-term debts 100
0.15 56
0.08 Long-term debts
17,771 27.18
21,959 33.06
Total debts 17,871
27.33 22,015
33.14 Equity attributable to owners
47,510 72.67
44,419 66.86
Total 65,381
100.00 66,434
100.00
108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
continued
DECEMBER 31, 2011 AND 2010, AND YEARS ENDED DECEMBER 31, 2011 AND 2010
Figures in tables are presented in billions of Rupiah, unless otherwise stated
109
45. CAPITAL MANAGEMENT continued
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for stockholders and benefits to other stockholders and
to maintain an optimum capital structure to minimize the cost of capital.
Periodically, the Company’s conducts debt valuation to assess possibilities of refinancing existing debts with the new ones which have more efficient cost that will lead to more optimize cost-of-debt.
In case of rich idle cash coupled with limited investment opportunities, the Company will consider of buying back its stocks or paying dividend to its stockholders.
In addition to complying with loan covenants, the Company also maintains its capital structure at the level it believes will not risk its credit rating and that is roughly equal with its competitors.
Debt to equity ratio comparing net interest-bearing-debt to total equity is a ratio which is monitored by management to evaluate the Company’s capital structure and review the effectiveness of the
Company’s debts. The Company monitors its debt levels to ensure the debt to equity ratio complies with or is below the ratio set out in its contractual borrowings and that such ratios are comparable or
better than other regional area entities in the telecommunications industry.
The Company debt to equity ratio as of December 31, 2011 and 2010 are as follows:
2011 2010
Total interest bearing debts 17,871
22,015 Less: Cash and cash equivalents
9,634 9,120
Net debts 8,237
12,895 Total equity attributable to owners
47,510 44,419
Net debt to equity ratio 17.34
29.03 As stated in Notes 18, 19, 20, the Company is required to maintain a certain debt to equity ratio and
debt service coverage ratio by the lenders. During the year ended December 31, 2011 and 2010, the Company has complied with the externally imposed capital requirements.
46. SUBSEQUENT EVENTS
a. Based on notarial deed No. 2 dated January 3, 2012 of Sjaaf De Carya Siregar, S.H., Infomedia’s stockholder issued 17,142,857 shares which amounted to Rp 9 billion. Metra, a stockholder of
Infomedia, bought all the newly issued shares. As a result, the Company’s ownership in Infomedia is diluted to 49.
b. On January 8, 2012, pursuant to the expiry of agreement with Apple Note 41c.iv, Telkomsel and Apple agreed to extend the agreement until March 30, 2012. As of the issuance date of the
consolidated financial statements, Telkomsel is in the process of obtaining another extension. c. On January 20, 2012, Telkomsel repaid US39 million of loans obtained from ICBC Note 20.
