Borrowings SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued m. Leases continued

PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2012 AND FOR THE YEAR THEN ENDED WITH COMPARATIVE FIGURES AS OF DECEMBER 31, 2011 AND FOR THE YEAR THEN ENDED AND AS OF JANUARY 1, 2011 Figures in tables are presented in billions of Rupiah, unless otherwise stated 27 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued r. Revenue and expense recognition continued vi. Other telecommunications services revenues continued In concession contract under USO, the Company and subsidiaries have contractual rights to receive considerations from the grantor. The Company and subsidiaries recognize a financial asset in its consolidated statements of financial position, in consideration for the services it provides designing, building, operation or maintenance assets under concession. Such financial assets are recognized in the consolidated statements of financial position as Account Receivables, for the amount of the fair value of the infrastructure on initial recognition and subsequently at amortized cost. The receivable is settled by means of the grantor’s payments received. The financial income calculated on the basis of the effective interest rate is recognized as financing income. Revenues from sales of other telecommunication services or goods are recognized upon completion of services and or delivery of goods to customers. vii. Multiple-element arrangements Where two or more revenue-generating activities or deliverables are sold under a single arrangement, each deliverable that is considered to be a separate unit of accounting is accounted for separately. The total revenue is allocated to each separately identifiable component based on the relative fair value of each component and the appropriate revenue recognition criteria are applied to each component as described above. viii. Agency relationship Revenues from an agency relationship are recorded based on the gross amount billed to the customers when the Company and subsidiaries acted as principal in sale of goods and services. Revenues are recorded based on the net amount retained the amount paid by the customer less with amount paid to the suppliers because in substance, the Company and subsidiaries has acted as an agent and earned commission from the suppliers of the goods and services sold. ix. Customer loyalty programme The Company and subsidiaries operate a loyalty point programme, which allows customers to accumulate points for every certain multiple of the usage of telecommunication services. The points can then be redeemed in the future for free or discounted products, provided other qualifying conditions are achieved. Consideration received is allocated between the telecommunication services and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points is determined based on historical information about redemption rate of award points, The fair value of the points issued is deferred and recognized as revenue when the points are redeemed or expired. x. Expenses Expenses are recognized as incurred on the accrual basis. PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2012 AND FOR THE YEAR THEN ENDED WITH COMPARATIVE FIGURES AS OF DECEMBER 31, 2011 AND FOR THE YEAR THEN ENDED AND AS OF JANUARY 1, 2011 Figures in tables are presented in billions of Rupiah, unless otherwise stated 28

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued s. Employee benefits

i. Short-term employee benefits All short-term employee benefits which consist of salaries and related benefits, vacation pay, incentives and other short-term benefits are recognized as expense on undiscounted basis when employees have rendered service to the Company and subsidiaries. ii. Pension and post-retirement health care benefit plans The net obligations in respect of the defined pension benefit and post-retirement health care benefit plans are calculated at the present value of estimated future benefits that the employees have earned in return for their service in the current and prior periods, less the fair value of plan assets and as adjusted for unrecognized actuarial gains or losses and unrecognized past service cost. The calculation is performed by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currencies in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement benefit obligation. Government bonds are used as there is no deep market for high quality corporate bonds. Plan assets are assets that are held by the pension and post-retirement health care benefit plans. These assets are measured at fair value at the end of the reporting period, which is based on the securities’ quoted market price information. The amount of prepaid pension costs that can be recognized is limited to the total of any unrecognized past service costs, unrecognized actuarial losses and the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. Actuarial gains or losses arising from experience adjustments and changes in actuarial assumptions, when exceeding the greater of 10 of the present value of defined benefit obligation or 10 of the fair value of plan assets, are charged or credited to the consolidated statements of comprehensive income over the average remaining service lives of the relevant employees. Prior service cost is recognized immediately if vested or amortized over the vesting period. For defined contribution plans, the regular contributions constitute net periodic costs for the period in which they are due and as such are included in staff costs as they become payable. iii. Long Service Awards “LSA” and Long Service Leave “LSL” Employees of Telkomsel are entitled to receive certain cash awards or certain numbers of days leave benefits based on length of service requirements. LSA are either paid at the time the employees reach certain anniversary dates during employment, or at the time of termination. LSL is either a certain number of days leave benefit or cash, subject to approval by management, provided to employee who has met the requisite number of years of service and with a certain minimum age. Actuarial gains or losses arising from experience and changes in actuarial assumptions are charged immediately to the consolidated statements of comprehensive income. The obligation with respect to LSA and LSL is calculated by an independent actuary using the projected unit credit method.