Stripping costs PT. Bayan Resources Tbk - Prospectus

Schedule 518 PT BAYAN RESOURCES AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 MARCH 2008 AND 2007 AND 31 DECEMBER 2007, 2006 AND 2005 Expressed in million Indonesian Rupiah, unless otherwise stated 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued q. Accounting for derivative financial instruments and hedging activities continued a committed or forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated statements of income. At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as hedges to specific assets and liabilities or to specific firm commitments or forecast transactions. The Group also documents its assessment, both at the hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

r. Provision for decommissioning, demobilisation and restoration

Effective 1 January 2008, the Group established a provision for decommissioning, demobilisation and restoration of certain mine-related assets as required by the Statement of Financial Accounting Standards “SFAS” No. 16—Fixed Assets Revised 2007, which became effective 1 January 2008. The estimated costs are recorded as part of the carrying values of the assets and depreciated over the remaining useful life of the related assets. The provision has been recorded as “provision for decommissioning, demobilisation and restoration” in the balance sheet and is accreted to full value through the income statements.

s. Basic earnings per share

Basic earnings per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the periodyear.

t. Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic conditions. The Group segments its financial reporting as follows: i business segments primary, where the Group’s business activities are classified into coal and non-coal; and ii geographical segments secondary, which classifies sales based on target market areas.

u. Sharing of production

As stipulated in the CCoW, the Government is entitled to take 13.5 of total coal produced from the final production processes established by GBP, PIK, TSA, WBM and FKP. In accordance with Presidential Decree No. 751996 dated 25 September 1996, for GBP and CCoW for PIK, TSA, WBM and FKP, these companies pay the Government’s share of production in cash, which represents 13.5 of sales after deduction of selling expenses. These companies recognise this entitlement on an accrual basis as royalty expense as part of cost of revenue.

v. Dividends

Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s consolidated financial statements in the period in which the dividends are declared. F-35