SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued u. Financial instruments continued

PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2016 and for the Year Then Ended Figures in tables are expressed in billions of Rupiah, unless otherwise stated 33 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued ab. Critical Accounting Estimates and Judgements continued i. Retirement benefits The present value of the retirement benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost income for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of retirement benefit obligations. The Group determines the appropriate discount rate at the end of each reporting period. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the obligations. In determining the appropriate discount rate, the Group considers the interest rates of Government bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement benefit obligations. If there is an improvement in the ratings of such Government bonds or a decrease in interest rates as a result of improving economic conditions, there could be a material impact on the discount rate used in determining the post-employment benefits obligations. Other key assumptions for retirement benefit obligations are based in part on current market conditions. Additional information is disclosed in Notes 29 and 30. ii. Useful lives of property and equipment The Group estimates the useful lives of its property and equipment based on expected asset utilization, considering strategic business plans, expected future technological developments and market behavior. The estimates of useful lives of property and equipment are based on the Group’s collective assessment of industry practice, internal technical evaluation and experience with similar assets. The Group reviews its estimates of useful lives at least each financial year-end and such estimates are updated if expectations differ from previous estimates due to changes in ecpectation of physical wear and tear, technical or commercial obsolescence and legal or other limitations on the use of the assets. The amounts of recorded expenses for any year will be affected by changes in these factors and circumstances. A change in the estimated useful lives of the property and equipment is a change in accounting estimates and is applied prospectively in profit or loss in the period of the change and future periods. Details of the nature and carrying amounts of property and equipment are disclosed in Note 9. iii. Provision for impairment of receivables The Group assesses whether there is objective evidence that trade and other receivables have been impaired at the end of each reporting period. Provision for impairment of receivables is calculated based on a review of the current status of existing receivables and historical collection experience. Such provisions are adjusted periodically to reflect the actual and anticipated experience. Details of the nature and carrying amounts of provision for impairment of receivables are disclosed in Note 5. iv. Income taxes Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the year in which such determination is made. Details of the nature and carrying amount of income tax are disclosed in Note 26. PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2016 and for the Year Then Ended Figures in tables are expressed in billions of Rupiah, unless otherwise stated 34

3. CASH AND CASH EQUIVALENTS

The breakdown of cash and cash equivalents is as follows: 2016 2015 Balance Balance Currency Original currency in millions Rupiah equivalent Original currency in millions Rupiah equivalent Cash on hand Rp - 10 - 10 Cash in banks Related parties PT Bank Mandiri Persero Tbk “Bank Mandiri” Rp - 1,897 - 672 US 41 548 51 707 JPY 6 1 11 1 EUR 1 11 1 8 HKD 1 1 1 1 AUD PT Bank Negara Indonesia Persero Tbk “BNI” Rp - 581 - 508 US 6 84 22 299 EUR 5 68 5 72 SGD PT Bank Rakyat Indonesia Persero Tbk “BRI” Rp - 95 - 140 US 8 107 11 155 Others Rp - 22 - 14 US Sub-total 3,415 2,577 Third parties The Hongkong and Shanghai Banking Corporation Ltd. “HSBC” US 13 176 8 110 HKD 2 4 10 18 SGD - - 1 6 Standard Chartered Bank “SCB” Rp - - US 6 74 31 430 SGD 5 43 1 13 PT Bank Permata Tbk “Bank Permata” Rp - 14 - 12 US 7 96 Development Bank of Singapore ”DBS” Rp - 101 - US - - PT Bank Muamalat Indonesia Tbk “Bank Muamalat” Rp - 6 - 61 US 2 24 27 373 Citibank, N.A. “Citibank” Rp - 5 - 103 US 1 12 2 26 EUR 1 4 Others each below Rp75 billion Rp - 146 - 86 US 2 33 1 15 SGD - - EUR AUD 1 12 1 13 TWD 3 1 19 8 MYR HKD MOP 1 Sub-total 749 1,278 Total cash in banks 4,164 3,855 Time deposits Related parties BRI Rp - 4,076 - 2,831 US 47 632 201 2,763 BNI Rp - 4,043 - 3,031 US 25 336 1 9 PT Bank Tabungan Negara Persero Tbk “Bank BTN” Rp - 3,356 - 885 Bank Mandiri Rp - 1,552 - 2,863 US 5 67 5 69 Sub-total 14,062 12,451