Deffered Charges on Landrights Treasury Stocks Stock Issuance Costs Impairment of Assets

PT. TUNAS BARU LAMPUNG Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 AND 2008 AND FOR THE NINE MONTHS PERIOD THEN ENDED Continued - 11 - - Leases Effectively January 1, 2008, Finance leases which transfer to the Company or its subsidiaries as lessee substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at their fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest in the remaining balance of the liability. Finance charges are charged directly against consolidated statements of income. Capitalized leased assets are depreciated over the estimated useful life of the asset except if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, in which case the capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognized as an expense in the consolidated statements of income on a straight-line basis over the lease term. Lease where the Company or its subsidiaries as lessor retain substantially all the risks and benefits of the ownership of the asset are classified as operating leases. Initial directs costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term in the same basis as rental income. Prior to January 1, 2008, lease transactions are accounted for under the capital lease method when all of the following criteria are met: 1 The lessee has the option to purchase the leased asset at the end of the lease term at a price mutually agreed upon at the inception of the lease agreement. 2 All periodic lease payments made by the lessee plus residual value shall represent a return of the cost of leased asset and interest thereon as the profit of the lessor. 3 Minimum lease period is two years. Lease transactions that do not meet the above criteria are recorded as operating leases. Finance lease transaction are treated and recorded as leased assets included in “Property, plant and equipment” and lease liabilities as “ Finance leased liabilities “ at the inception of the lease term. The leased assets and lease liabilities under the capital lease method are recorded at the present value of the total lease installment payments plus residual value option price to be paid by the lessee at the end of lease term. During the lease term, each lease payment is allocated and recorded as repayment of the lease liabilities and interest expenses thereon based on an interest rate applied to the carrying amount of the related lease liabilities. Leased assets are depreciated using the same method and estimated useful lives used for directly acquired property, plant and equipment.

o. Deffered Charges on Landrights

Deffered charges relating to the legal processing of landrights are amortized using the straight – lines method over the legal terms of the landrights, since the legal term of the landrights is shorter than its economic life. The amortization begins when the legal processing of landrights is substantially complete. PT. TUNAS BARU LAMPUNG Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 AND 2008 AND FOR THE NINE MONTHS PERIOD THEN ENDED Continued - 12 -

p. Treasury Stocks

Treasury stocks are accounted for using the par value method. Under the par value method, the treasury stock is accounted for at par value as “Treasury Stock” account and presented as a reduction of “Capital Stock” account. If the treasury stock had originally been issued at a price above par value, the “Additional Paid - in Capital” account is debited for the related difference between the par value and the reacquisition cost of the treasury stocks.

q. Stock Issuance Costs

Stock issuance cost are deducted from the “Additional paid – in capital “ portion of the stocks issued and are not amortized..

r. Impairment of Assets

An assessment by management of the assets value is made at each balance sheet date to determine whether there is any indication of impairment of any assets and possible written – down to its recoverable amount whenever events or changes in circumstances indicate that the asset value is impaired. An impairment loss is recognized only if the carrying amount of an asset exceeds the recoverable amount. An asset‟s recoverable amount is computed as the higher of the asset‟s value in use and its net selling price. On the other hand, a reversal of an impairment loss is recognized whenever there is indication that the asset is not impaired anymore. The amount of impairment loss reversal of impairment loss is charged to credited in current year ‟s operations.

s. Revenue and Expense Recognition