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Adaro Energy Annual Report 2008 www.adaro.com
Adaro in Summary From Us to You
Running Adaro Management Report
Owning Adaro
PT ADARO ENERGY Tbk Schedule 56
FORMERLY PT PADANG KARUNIA AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2008 AND 2007 Expressed in million Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
b. Principles of consolidation continued
Mining properties represent the fair value adjustment of mining properties acquired at the date of acquisition of Adaro and are stated at cost. Mining properties are amortised over the life of the property using the units of production method from the date
of the acquisition based on estimated reserves. Changes in estimated reserves are accounted for on a prospective basis, from the beginning of the period in which the change occurs.
c. Foreign currency translation
Transactions denominated in currencies other than Rupiah are converted into Rupiah at the exchange rate prevailing at the date of the transaction. At the balance sheet date, monetary assets and liabilities in currencies other than Rupiah are
translated at the exchange rate prevailing at the balance sheet date. Exchange gains and losses arising from the translation of monetary assets and liabilities in currencies other than Rupiah are recognised in the consolidated statement of income. As at
the balance sheet date, the exchange rates used, based on middle rates published by Bank Indonesia, were as follows Rupiah full amount:
2008 2007
US Dollars “US” 10,950
9,419 Great Britain Pound Sterling “
ǧ” 15,803
18,804 Hong Kong Dollars “HK”
1,413 1,208
Malaysian Ringgit “RM” 3,153
2,828 Singapore Dollars “S”
7,607 6,502
Australian Dollars “A” 7,556
8,229 Euro “
¼” 15,432
13,760 Japanese Yen “¥”
121 83
d. Receivables
Receivables are presented at their estimated recoverable value, based on management’s review of the status of each receivable account at the balance sheet date. Receivables are written-off during the period in which they are determined to be
not collectible.
e. Inventories
Coal inventory is valued at the lower of cost or net realisable value. Cost is determined based on the weighted average cost incurred during the period and includes an appropriate portion of fixed and variable overheads. Net realisable value is the
estimated sales amount in the ordinary course of business less the costs of completion and selling expenses. Spare parts, fuel, lubricants and supplies are valued at cost, determined on a first-in, first-out basis, less provision for obsolete
items. Provision for obsolete and slow moving inventory is determined on the basis of estimated future usage or sale of individual inventory items. Supplies of maintenance materials are charged to production costs in the period in which they are
used.
f. Investments in debt and equity securities
Investments in equity securities that do not have readily determinable fair values are recorded using either the equity method or the cost method.
Investments in equity securities in which the Group has between 20 and 50 of the voting rights and over which the Group exercises significant influence, but which it does not control, are accounted for by the equity method. Investments in equity
securities in which the Group has less than 20 of the voting rights and over which the Group exercises no significant influence, are accounted for by the cost method.
Under the equity method, the investment is initially recorded at cost and the carrying amount is increased or decreased to recognise the Group’s share of the profits or losses of the investee after the date of acquisition. Profit distributions except
stock dividends received from the investee reduce the carrying amount of the investment. Under the cost method, the Group records its investments in investees at cost. The Group recognises income only to the extent that it receives profit distributions
except stock dividends from the accumulated net profits of the investee.
For investments in debt and equity securities that have readily determinable fair values, the Group classifies its investments in securities into the following categories: trading, held-to-maturity and available-for-sale. The classification is dependent on the
purpose for which the investments are acquired. Management determines the classification of its investments at the time of the purchase and re-evaluates the designation on a regular basis. Investments that are acquired principally for the purpose of
generating a gain from short-term maximum of three months fluctuations in price are classified as trading investments and included in current assets.
Adaro Energy Annual Report 2008 www.adaro.com
139
Contact Us Governing Adaro
Financial Report Corporate Social Responsibility
PT ADARO ENERGY Tbk Schedule 57
FORMERLY PT PADANG KARUNIA AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2008 AND 2007 Expressed in million Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
f. Investments in debt and equity securities continued
Investments with a fixed maturity that management has the intent and ability to hold to maturity are classified as held-to- maturity and are included in non-current assets, except for maturities within 12 months from the balance sheet date which are
classified as current assets. Held-to-maturity investments are carried at amortised cost using the effective yield method. Investments not classified as either held-to-maturity or trading securities are classified as available-for-sale, and are included
in non-current assets unless management has expressed an intention to hold the investment for less than 12 months from the balance sheet date or unless they need to be sold to raise operating capital, in which case they are included in current assets.
Realised and unrealised gains and losses arising from changes in the fair value of trading investments are recognised in the consolidated statement of income in the period in which they arise. Unrealised gains and losses arising from changes in the
fair value of securities classified as available-for-sale are recognised in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in
the consolidated statement of income as gains and losses from investment securities. The costs of securities sold are determined on the basis of the weighted average method.
g. Impairment of investment in equity and debt securities
At the balance sheet date, the Group undertakes a review to determine whether there is any indication of impairment of investments in equity and debt securities. Provision is only made when there has been a significant reduction or a permanent
decline in the value of the investment.
h. Fixed assets and depreciation
Fixed assets, except land, are stated at cost of acquisition less accumulated depreciation. Fixed assets, except the land and fixed assets of Adaro, are depreciated to their estimated residual value using the straight-
line method over their expected useful lives as follows:
Years
Buildings 20
Infrastructure 20 - 30
Operational equipment 8 - 10
Project equipment 4
Mining equipment 4
Vehicles 4
Office equipment 4 - 5
The fixed assets of Adaro are depreciated using the straight-line method to their estimated residual value, over the lesser of the estimated useful lives of the assets, the life of the mine or the term of the CCA, stated as follows:
Years
Buildings 10 - 21
Machinery, operational equipment and vehicles 3 - 20
Office equipment 10
Crushing and handling facilities 10 - 30
Roads and bridges 17 - 30
Stockpile facilities 17 - 20
Dock facilities 20
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated statement of income during the financial period in which they are incurred.
For assets which are no longer utilised or sold or surrendered to the Government, the carrying amount and its accumulated depreciation are eliminated from the consolidated financial statements, and the resulting gains and losses on the disposal of
fixed assets are recognised in the consolidated statement of income. The accumulated costs of the construction of buildings and plant and the installation of machinery are capitalised as
construction in progress. These costs are reclassified to fixed asset accounts when the construction or installation is completed. Depreciation is charged from that date.
