Schedule 516 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 l. Employee benefits
i Post-retirement benefit obligations A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided,
usually as a function of one or more factors such as age, years of service or compensation. The Group is required to provide a minimum amount of pension benefits in accordance with Labour
Law No. 132003 or the Group’s regulation “Regulation”, whichever is higher. Since the Labour Law and the Regulation set the formula for determining the minimum amount of benefits, in substance pension plans under
the Labour Law or the Regulation represent defined benefit plans. The provision is determined by periodic actuarial calculations.
The liability recognised in the balance sheets in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the balance sheet date, together with adjustments for unrecognised
actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by independent actuaries 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 high quality corporate bonds that are denominated in the currency in which
the benefit will be paid, and that have terms to maturity approximating the terms of the related pension liability. Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and
amendments to the pension plan. When exceeding 10 of the present value of the defined benefit at balance sheet date, are charged or credited to income or expense over the average remaining service lives of the related
employees.
ii Termination benefits Termination benefits are payable whenever an employee’s employment is terminated before the normal
retirement date. The Group recognises termination benefits when it is demonstrably committed to terminate the employment of current employees according to a detailed formal plan with a low possibility of withdrawal.
m. Revenue and expense recognition
Revenue represents revenue earned from the sale of the Group’s products, and delivery of coal handling services, share of port charges, mining services, profit sharing from proceeds on the sale of coal and rental
income. Revenue from sales of coal is recognised when there has been a passing of risk to the customers, and:
‰ It is probable that economic benefits associated with the transaction will flow to the Group; ‰ The quantity and quality of the product can be determined with reasonable accuracy;
‰ The product has been dispatched to the customer and is no longer under the physical control of the Group or property in the product has earlier passed to the customer; and
‰ The selling price and related costs can be determined with reasonable accuracy. Revenue from services is recognised when services are rendered to the customers.
Expenses are recognised as incurred on the accrual basis. F-33
Schedule 517 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 n. Taxation
Deferred income tax is provided using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Current
enacted or substantially enacted tax rates are used to determine deferred income tax. Deferred tax assets relating to future tax benefits and the carry forward of unused tax losses are
recognised to the extent that it is probable that future taxable profit will be available against which the future tax benefits and unused tax losses can be utilised.
Amendments to taxation obligations are recorded when an assessment is received or, if appealed against, when the results of the appeal are determined.
o. Stripping costs
For mining areas where stripping is performed based on a life of mine average stripping ratio, stripping costs are recognised as production costs based on the average life of mine stripping ratio. When the actual
stripping ratio exceeds the life of mine average, the excess stripping costs are deferred and recorded in the consolidated balance sheets as deferred stripping costs. When the actual stripping ratio is lower than the life of
mine average, the difference is adjusted against the amount of deferred stripping costs carried forward from prior periods or is recognised in the consolidated balance sheets as accrued stripping costs. Changes in the estimated
average life of mine stripping ratio are accounted for on a prospective basis over the remaining mine life.
p. Environmental expenses
Restoration, rehabilitation and environmental expenditures incurred during the production phase are charged to cost of goods sold as incurred.
q. Accounting for derivative financial instruments and hedging activities
Derivative financial instruments are initially recognised in the consolidated balance sheets at cost and subsequently are remeasured at their fair value. The method of recognising the resulting gain or loss is dependent
on the nature of the item being hedged. The Group designates certain derivatives as either 1 a hedge of the fair value of a recognised asset or liability or of an unrecognised firm commitment fair value hedge; or 2 a hedge
of a forecasted transaction cash flow hedge.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly effective, are recorded in the consolidated statements of income, along with any changes in the fair value
of the hedged asset or liability that is attributable to the hedged risk. Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are
highly effective, are recognised in equity, in the fair value hedging reserve account. Amounts deferred in equity are subsequently released to the consolidated statements of income and classified as revenue or expense in the
same periods during which the hedged forecasted transaction affects the consolidated statements of income.
Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the consolidated statements of income.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when
the committed or forecasted transaction is ultimately recognised in the consolidated statements of income. When
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