Inventories SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued f. Investments continued

PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED continued SEPTEMBER 30, 2007 AND 2008, AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008 Figures in tables are presented in millions of Rupiah, unless otherwise stated 23

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

k. Property, plant and equipment - direct acquisitions continued Computer software used for data processing is included in the value of the associated hardware. Property under construction is stated at cost until construction is completed, at which time it is reclassified to the specific property, plant and equipment account to which it relates. During the construction period, borrowing costs, which include interest expense and foreign currency exchange differences incurred to finance the construction of the asset, are capitalized in proportion to the average amount of accumulated expenditures during the year. Capitalization of borrowing cost ceases when the construction has been completed and the asset is ready for its intended use. Equipment temporarily unused are reclassified into equipment not used in operation and depreciated over their estimated useful life using straight-line method. l. Property, plant and equipment under capital leases Property, plant and equipment acquired under capital leases are stated at the present value of minimum lease payments and the residual values option price paid by the Company and its subsidiaries at the end of lease period. At inception of the lease, a corresponding liability, which equals to the present value of minimum lease payments, is also recorded and subsequently reduced by the principal component of each minimum lease payment. The interest component of each minimum lease payment is recognized in the consolidated statement of income. Since January 1, 2008, the Company and its subsidiaries has applied PSAK 30 Revised 2007, “Lease” prospectively. Based on PSAK 30 Revised 2007, property, plant and equipment under capital lease is recognized if the lease transfers substantially all the risks and rewards incidental to ownership. A lease is classified into capital lease or operating lease based on the substance not the form of the contract. Leased assets are depreciated using the same method over the shorter of the lease term and its economic useful life.

m. Revenue-Sharing Arrangements RSA

Revenues from RSA are recognized based on Company’s share as agreed upon in the contracts. The Company records assets under RSA as “Property, plant and equipment under RSA” with a corresponding initial credit to “Unearned income on RSA” presented in the liabilities section of the consolidated balance sheet based on the costs incurred by the investors as agreed upon in the contracts entered into between the Company and the investors. Property, plant and equipment are depreciated over their estimated useful lives using the straight-line method Note 2k. Unearned income related to the acquisition of the property, plant and equipment under RSA is amortized over the revenue-sharing period using the straight-line method. At the end of the revenue-sharing period, the property, plant and equipment under RSA is reclassified to the “Property, plant and equipment” account.