PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2011 and 2010 and For the Years then Ended
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g. Use of Estimates
Management makes estimates and assumptions in the preparation of the financial statements which affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.
h. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, demand deposits with Bank Indonesia, demand deposits with other banks, other short term highly liquid
investments with original maturity of three 3 months or less from acquisition date and which are not used as collateral and are not restricted and funds placed in securities companies.
i. Financial Instruments
Effective January 1, 2010, the Group adopted PSAK No. 50 Revised 2006, “Financial Instruments: Presentation and Disclosures” and PSAK No. 55 Revised 2006, “Financial
Instruments: Recognition and Measurement”.
In adopting the above new standards, the Group have identified the following transition adjustments in accordance with the Technical Bulletin No. 4 concerning the Transition
Provisions for the First Adoption of PSAK No. 50 Revised 2006 and PSAK No. 55 Revised 2006 as issued by the Indonesian Institute of Accountants.
The effect of the transition to PSAK No. 50 Revised 2006 and PSAK No. 55 Revised 2006 to the Group’s consolidated statement of financial position as of January 1, 2010 is set
out in the following table:
As reported As adjusted
January 1, Transition
January 1, 2010
Adjustments 2010
Rp 000,000 Rp 000,000
Rp 000,000 Assets
Cash and cash equivalents 1,754,227
886 1,755,113
Short term investments Placements with other banks
273,277 2,760
276,037 Securities
6,086,273 1,107
6,087,380 Net investment in finance lease
107,867 2,479
110,346 Factoring Receivables
70,497 317
70,180 Loans
5,322,975 4,316
5,318,659 Total
13,615,116 2,599
13,617,715 Equity
Retained earnings 3,597,391
2,599 3,599,990
The above transition adjustments were derived from the reassessment of impairment losses for financial assets, which represents the difference between impairment loss reserve
calculated based on PSAK No. 55 Revised 2006 and allowance for impairment losses booked as of January 1, 2010, including allowance for impairment losses calculated using
the Bank Indonesia Regulation concerning allowance of productive assets by BS, a subsidiary Note 2p. The transition adjustments were adjusted to retained earnings on
January 1, 2010.
PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2011 and 2010 and For the Years then Ended
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Recognition and Classification
Group recognizes a financial asset or a financial liability in the consolidated statement of financial position, if and if only they become a party to the contractual provisions of the
instrument. All regular way purchases and sales of financial instruments are recognized on the settlement date.
Financial instruments are recognized initially at fair value, which is the fair value of the consideration given in case of an asset or received in case of a liability. The fair value of
the consideration given or received is determined by reference to the transaction price or other market prices. If such market prices are not reliably determinable, the fair value of the
consideration is estimated as the sum of all future cash payments or receipts, discounted using the prevailing market rates of interest for similar instruments with similar maturities.
The initial measurement of financial instruments includes transaction costs, except for financial instruments at fair value through profit and loss FVPL.
Transaction costs include only those costs that are directly attributable to the acquisition of a financial asset or issue of financial liability and they are incremental costs that would not
have been incurred if the instrument had not been acquired or issued. Such transaction costs are amortized over the terms of the instruments based on the effective interest rate
method.
Effective interest rate method is a method of calculating the amortized cost of a financial asset or a financial liability and allocating the interest income or expense over the relevant
period by using an interest rate that exactly discounts estimated future cash payments or receipts through the expected life of the instruments or, when appropriate, a shorter period
to the net carrying amount of the financial instruments. When calculating the effective interest, the Group estimate future cash flows considering all contractual terms of the
financial instruments excluding future credit losses and includes all fees and points paid or received that are an integral part of the effective interest rate.
Amortized cost is the amount at which the financial asset or financial liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortization
using the effective interest rate method of any difference between the initial amount recognized and the maturity amount, minus any reduction for impairment.
The classification of the financial instruments depends on the purpose for which the instruments were acquired and whether they are quoted in an active market. At initial
recognition, the Group classify their financial instruments in following categories: financial assets at FVPL, loans and receivables, held-to-maturity HTM investments, available for
sale AFS financial assets, financial liabilities at FVPL and other financial liabilities; and, where allowed and appropriate, re-evaluate such classification at every reporting date.
Determination of Fair Value
The fair value of financial instruments traded in active markets at the consolidated statement of financial position date is based on their quoted market price or dealer price quotations bid
price for long positions and ask price for short positions, without any deduction for transaction costs. When current bid and asking prices are not available, the price of the
most recent transaction is used since it provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the
transaction. For all other financial instruments not listed in an active market, except investment in unquoted equity securities, the fair value is determined by using appropriate
valuation techniques. Valuation techniques include net present value techniques, comparison to similar instruments for which market observable prices exist, options pricing
models, and other relevant valuation models. In the absence of a reliable basis for determining fair value, investments in unquoted equity securities are carried at cost net of
impairment.
PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2011 and 2010 and For the Years then Ended
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Day 1 ProfitLoss Where the transaction price in a non-active market is different from the fair value of other
observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Group recognize
the difference between the transaction price and fair value a Day 1 profitloss in the consolidated statement of comprehensive income unless it qualifies for recognition as some
other type of asset. In cases where the data is not observable, the difference between the transaction price and model value is only recognized in the consolidated statement of
comprehensive income when the inputs become observable or when the instrument is derecognized. For each transaction, the Group determines the appropriate method of
recognizing the “Day 1” profitloss amount. Financial Assets
1. Financial Assets at FVPL Financial assets at FVPL include financial assets held for trading and financial assets
designated upon initial recognition at FVPL. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are
also classified as held for trading unless they are designated as effective hedging instruments.
Financial assets may be designated at initial recognition at FVPL if the following criteria are met:
a. the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the financial assets or recognizing gains or
losses on them on a different basis; or
b. the assets are part of a group of financial assets, financial liabilities or both which
are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or
c. the financial instruments contains an embedded derivative, unless the embedded
derivative does not significantly modify the cash flows or it is clear, with little or no analysis, that it would not be separately recorded.
Financial assets at FVPL are recorded in the consolidated statements of financial position at fair value. Changes in fair value are recognized directly in the consolidated
statements of comprehensive income. Interest earned is recorded as interest income, while dividend income is recorded as part of other income according to the terms of the
contract, or when the right of payment has been established. As of December 31, 2011 and 2010, this category includes short term investments –
securities bonds, units of mutual fund, shares and warrants which are traded in the Indonesia Stock Exchange and Segregated funds net assets – unit link units of mutual
fund and shares that are traded in the Indonesia Stock Exchange, and Segregated funds net assets – sharia units of mutual fund, other assets - derivative receivables.
2. Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are not entered into with the
intention of immediate or short-term resale and are not classified as financial assets at FVPL, HTM investments or AFS financial assets.
