Adaro Energy Annual Report 2009 149 www.adaro.com
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 511
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2009 AND 2008
Expressed in million Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
l. Environmental obligations continued
Provision for environmental issues that may not involve the retirement of an asset, where the Group is a responsible party are recognised when:
- the Group has a present legal or constructive obligations as a result of past events;
- it is probable that an outflow of resources will be required to settle the obligation; and
- the amount has been reliably estimated.
Provisions are measured at the present value of the expenditures 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. The
increase in the provision due to passage of time is recognised as interest expense.
m. Stripping costs
Stripping costs are recognised as production costs based on the annual planned stripping ratio. The annual planned stripping ratio is determined based on current knowledge of the disposition of coal resources and is estimated not to be materially
different from the long term planned stripping ratio. If the actual stripping ratio exceeds the planned ratio, the excess stripping costs are recorded in the consolidated balance sheet as deferred stripping costs. If the actual stripping ratio is lower than the
planned stripping ratio, the difference is adjusted against the amount of deferred stripping costs carried forward from prior periods or is recognised in the consolidated balance sheet as accrued stripping costs. Changes in the planned stripping ratio
are considered as changes in estimates and are accounted for on a prospective basis. Accrued or deferred stripping cost are amortised using a straight-line basis over the remaining mine life or the remaining term of the CCA, whichever is shorter.
n. Deferred financing costs
Costs incurred to obtain financing are deferred and are amortised as an adjustment to finance charges on a straight-line basis over the terms of the related financing agreements. Commitment fees incurred subsequent to obtain the financing are
recorded as finance charges.
o. Deferred expenses
Expenditures which are considered to have a benefit of more than one year, are deferred and amortised using the straight -line method over the periods in which the benefit is realised.
p. Provision for employee benefits
i Post-retirement benefit obligations
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The Group is required to provide a minimum amount of pension benefit in accordance with Labour Law No. 132003 or the Group’s Collective Labour Agreement the “CLA”, whichever is higher. Since the Labour Law or the CLA sets the
formula for determining the minimum amount of benefits, in substance pension plans under the Labour Law or the CLA represent defined benefit plans.
The liability recognised in the consolidated balance sheet in respect of the defined benefit pension plans is the p resent value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, 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 government bonds considering currently there is no deep market for high-quality corporate bonds that are denominated
in the currency in which the benefits will be paid, and that have terms of maturity approximating the terms of the related pension liability.
Expense charged to the consolidated statement of income include the current service cost, interest expense, amortisation of past service cost and actuarial gains and losses.
Past-service costs are recognised immediately in the consolidated statement of income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time the vesting period. In
this case, the past-service costs are amortised on a straight-line basis over the vesting period. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, when exceeding
10 of the present value of the defined benefit obligation before deducting any plan assets or 10 of the fair value of any plan assets at the balance sheet date, are charged or credited to the consolidated statement of income over the
average remaining service lives of the employees participating in the plan.
