Provision SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued u. Financial instruments continued

PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of June 30, 2016 and For the Six Months Period Then Ended unaudited Figures in tables are expressed in billions of rupiah, unless otherwise stated 32 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 30 and 31. ii. Useful lives of property and equipment The Group estimate the useful lives of their 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 review estimates of useful lives at least each financial year end and such estimates are updated if expectations differ from previous estimates due to 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 amount 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 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 amount 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 27. PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of June 30, 2016 and For the Six Months Period Then Ended unaudited Figures in tables are expressed in billions of rupiah, unless otherwise stated 33

3. CASH AND CASH EQUIVALENTS

June 30, 2016 December 31, 2015 Balance Balance Original Original currency Rupiah currency Rupiah Currency in millions equivalent in millions equivalent Cash on hand Rp - 69 - 10 Cash in banks Related parties PT Bank Mandiri Persero Tbk “Bank Mandiri” Rp - 794 - 672 US 36 481 51 707 JPY 7 1 11 1 EUR 1 9 1 8 HKD 1 1 1 1 AUD PT Bank Negara Indonesia Persero Tbk “BNI” Rp - 604 - 508 US 3 36 22 299 EUR 5 71 5 72 SGD PT Bank Rakyat Indonesia Persero Tbk “BRI” Rp - 118 - 140 US 4 51 11 155 Others Rp - 16 - 14 US Sub-total 2,182 2,577 Third parties Standard Chartered Bank “SCB” Rp - - - US 13 175 31 430 SGD 9 92 1 13 PT Bank Muamalat Indonesia Tbk “Bank Muamalat” Rp - 42 - 61 US 3 27 373 The Hongkong and Shanghai Banking Corporation Ltd. “HSBC” US 12 163 8 110 HKD 1 2 10 18 SGD 1 1 6 Citibank, N.A. “Citibank” Rp - 23 - 103 US 1 16 2 26 EUR 4 Others each below Rp75 billion Rp - 180 - 98 US 4 55 1 15 EUR AUD 1 13 TWD 3 1 19 8 MYR HKD MOP Sub-total 753 1,278 Total cash in banks 2,935 3,855 Time deposits Related parties BNI Rp - 4,604 - 3,031 US 3 42 1 9 BRI Rp - 2,027 - 2,831 US 193 2,555 201 2,763 Bank Mandiri Rp - 1,111 - 2,863 US 7 92 5 69 PT Bank Tabungan Negara Per sero Tbk “Bank BTN” Rp - 1,343 - 885 Sub-total 11,774 12,451