PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 518
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013
Expressed in thousands of US Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
q. Leases continued
Fixed assets acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term, unless there is reasonable certainty the Group will obtain ownership of the asset by the end of the lease term, in
which case the leased asset is depreciated over its useful life.
r. Provision
i Provision for decommissioning, mine reclamation and mine closure
Restoration, rehabilitation and environmental expenditure to be incurred in relation to the remediation of disturbed areas during the production phase are charged to cost of revenue when the obligation arising from the
disturbance occurs as extraction progresses. These obligations are recognised as liabilities when a legal or constructive obligation has arisen from activities
which have already been performed. This obligation initially and subsequently measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate, that reflects current market
assessments of the time value of money and the risks specific to the obligation. Changes in the measurement of a liability which arises during production are also charged to cost of revenue, while the increase in the provision due
to the passage of time is recognised as a finance cost.
Provision for decommissioning of mining assets and related post mining activities as well as the abandonment and decommissioning of other long-lived assets is made for the legal obligations associated with the retirement of
mining related assets and other long lived assets including the decommissioning of buildings, equipment, crushing and handling facilities, infrastructure and other facilities that resulted from the acquisition, construction or
development of such assets. These obligations are recognised as liabilities when a legal or constructive obligation is incurred with respect to the retirement of an asset is incurred, with the initial and subsequent measurement of
the obligation at the present value of the expenditure which is expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to
the obligation. An asset retirement cost equivalent to these liabilities is capitalised as part of the related asset’s carrying value and is subsequently depreciated or depleted over the asset’s useful life. The increase in these
obligations due to the passage of time is recognised as a finance cost.
The changes in the measurement of decommissioning obligations that result from changes in the estimated timing or amount of any outflow of resources embodying economic benefits e.g. cash flow required to settle the
obligations, or a change in the discount rate will be added to or deducted from, the cost of the related asset in the current year. The amount deducted from the cost of the asset should not exceed its carrying amount. If a decrease
in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in profit or loss. If the adjustment results in an addition to the cost of an asset, the Group will consider whether this is an indication
that the new carrying amount of the asset may not be fully recoverable. If there is any such indication, the Group will test the asset for impairment by estimating its recoverable amount and will record the impairment losses
incurred, if any.
ii Other provisions
Provision for restructuring costs, legal claims, environmental issues that may not involve the retirement of an asset, reclamation and closure of mining areas and others is recognised when:
• the Group has a present legal or constructive obligation as a result of past events;
• it is probable that an outflow of resources will be required to settle the obligation; and
• the amount can be reliably estimated.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Although the likelihood of an outflow for any one
item may be small, it may well be probable that some outflow of resources will be needed to settle the class of obligations as a whole. If that is the case, a provision is recognised.
Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to
the obligation. Increase in the provision due to the passage of time is recognised as a finance cost.
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PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 519
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013
Expressed in thousands of US Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
s.
Borrowings
Borrowings are recognised initially at their fair value, net of any transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds net of transaction costs and the
redemption value is recognised in profit or loss over the period of the borrowing, using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs.
To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for financing cost and amortised over the period of the facility to which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date.
Borrowing costs either directly or indirectly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is substantially ready for its intended
use or sale. For borrowings directly attributable to a qualifying asset, the amount to be capitalised is determined as the actual borrowing costs incurred during the year, less any income earned on the temporary investment of such
borrowings. For borrowings that are not directly attributable to a qualifying asset, the amount to be capitalised is determined by applying a capitalisation rate to the amount spent on the qualifying asset. An entity shall cease
capitalising borrowing costs when substantially all of the activities necessary to prepare the qualifying asset are complete.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
u. Employee benefits
