PT SUMMARECON AGUNG Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2016 unaudited and December 31, 2015 audited and For the period of six months ended June 30, 2016 and 2015 unaudited
Expressed in thousands of Indonesian Rupiah, unless otherwise stated
38
3. MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS CONTINUED
Judgments continued
Valuation of property continued In some cases, the fair value is determined based on recent real estate transactions with similar characteristics
and location to those of the Group’s assets. Total fair value as of December 31, 2015 is disclosed in Notes 11 and 12 to the consolidated financial statements.
Operating lease contracts – the Group as lessor
The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the
significant risks and rewards of ownership of the leased property and, therefore, it accounts for the leases as operating leases.
Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below:
Determination of fair value of financial assets and financial liabilities
When the fair value of financial assets and financial liabilities recorded in the consolidated statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including
the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair value.
The judgment includes consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
Estimating useful lives of fixed assets and investment properties
The Group estimates the useful lives of its fixed assets and investment properties based on expected asset utilization as anchored on business plans and strategies that also consider expected future technological
developments and market behavior. The estimation of the useful lives of fixed assets and investment properties is based on the Group’s collective assessment of industry practice, internal technical evaluation and experience with
similar assets. The estimated useful lives are reviewed at least each financial year end and 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.
it is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above.
The amounts and timing of recorded expenses for any year are affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the Group’s fixed assets and investment properties
increases the recorded cost of sales and direct costs and operating expenses and decreases total assets.
Estimation of pension cost and other employee benefits The cost of defined benefit plan and the present value of the pension obligation are determined using the projected-
unit-credit method. Actuarial valuation includes making various assumptions which consist of, among other things, discount rates, expected rates of return on plan assets. rates of compensation increases and mortality rates.
Actual results that differ from the Group’s assumptions are recognized as other comprehensive income. Due to the complexity of the valuation and its underlying assumptions and long-term nature, a defined benefit obligation is
highly sensitive to changes in assumptions.
While the Group believes that its assumptions are reasonable appropriate, significant differences in the Group’s actual experience or significant changes in its assumptions may materially affect the costs of and obligations for
pension and other long-term employee benefits. All assumptions are reviewed at each reporting period.
PT SUMMARECON AGUNG Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2016 unaudited and December 31, 2015 audited and For the period of six months ended June 30, 2016 and 2015 unaudited
Expressed in thousands of Indonesian Rupiah, unless otherwise stated
39
3. MANAGEMENT’S USE OF JUDGEMENTS, ESTIMATES, AND ASSUMPTIONS CONTINUED
