PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2011 and 2010 and For the Years then Ended
- 39 - Productive assets are written-off against allowance for impairment losses of productive
assets when management believes that productive assets should be written-off when the debtor is unable to pay and or difficult to recover. Recoveries of productive assets that have
been written off are recorded as an addition to allowance for impairment losses of productive asset account when received. If the amount received is more than the principal amount, the
excess is recognized as interest income. Refer to Note 2b concerning change in accounting policy on commitment and contingencies
in 2011. The Company and other subsidiaries are engaged in non-banking business
An allowance for impairment losses on receivables is provided based on management’s evaluation of the collectibility of the individual receivable account short-term investments,
securities purchased under agreements to resell, consumer financing receivables, net investment in finance lease, factoring receivables, premiums and reinsurance receivables
and other accounts receivable.
Accounting policy on allowance for impairment losses on receivables is described in Note 2i.
q. Financial Guarantee Contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss incurred because a specified debtor defaulted to
make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to bank, financial institutions and other institutions on behalf of
customers to secure loans and other banking facilities. Financial guarantees are initially recognized in the financial statements at fair value on the
date the guarantee was given. The fair value of a financial guarantee at inception is likely to equal the premium received because all guarantees are agreed on arm’s length terms and
the initial fair value is amortised over the life of the financial guarantees. Subsequently, they are measured at the higher of amortised amount and the present value
of any expected payment when a payment under the guarantee has become probable and the difference is charged to other operating expense in consolidated statement of
comprehensive income.
r. Investment Properties
Investment properties, except land, are measured at cost, including transaction costs, less accumulated depreciation and any impairment loss. The carrying amount includes the cost
of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment
property. Investment properties are derecognized when either they have been disposed of or when the
investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an
investment property are recognized in the consolidated statement of comprehensive income in the year of retirement or disposal.
Investment properties, depreciated over its estimated useful life using the straight-line method at 5 per annum.
