Factoring Receivables Summary of Significant Accounting and Financial Reporting Policies

PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2012 and 2011 and January 1, 2011December 31, 2010 and For the Years then Ended December 31, 2012 and 2011 Figures are Presented in Millions of Rupiah, unless Otherwise Stated - 42 - An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. When assets are sold or retired, the cost and related accumulated depreciation and amortization and any impairment loss are eliminated from the accounts. Any gains or loss arising from de-recognition of property and equipment calculated as the difference between the net disposal proceeds, if any, and the carrying amount of the item is included in the consolidated statement of comprehensive income in the year the item is derecognized. The asset’s residual values, if any, useful lives and depreciation method are reviewed and adjusted if appropriate, at each financial year end. Construction in Progress Construction in progress represents property and equipment under construction which is stated at cost and is not depreciated. The accumulated costs will be reclassified to the respective property and equipment account and will be depreciated when the construction is substantially complete and the asset is ready for its intended use.

s. Foreclosed Properties

Foreclosed properties are stated at the lower of carrying amount and fair value less costs to sell. The difference between between the value of the foreclosed properties and the outstanding loan principal, if any, is charged to the current year consolidated statement of comprehensive income. The difference between the carrying value of the foreclosed property and the proceeds from its sale is recognized as a gain or loss in the period the property was sold. The costs of maintenance of foreclosed properties are charged to consolidated statement of comprehensive income when incurred. The carrying amount of the property is written-down to recognize a permanent dimunition in value of the foreclosed property, which is charged to the current year consolidated statement of comprehensive income. Management evaluates regulary the carrying value of foreclosed property. The carrying amount of the property is written-down to recognize a permanent dimunition in value of the foreclosed property, which is charged to the current year consolidated statement of comprehensive income.

t. Prepaid Expenses

Prepaid expenses are amortized over their beneficial or contract periods using the straight- line method.

u. Impairment of Non-Financial Assets

The Group assesses at each annual reporting period whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount.