PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued DECEMBER 31, 2004 AND 2005, AND FOR YEARS ENDED
DECEMBER 31, 2004 AND 2005 Figures in tables are presented in millions of Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
g. Investments continued
iii. Investments in associated companies Investments in shares of stock in which the Company has 20 to 50 of the voting rights, and
over which the Company exerts significant influence, but not control, over the financial and operating policies are accounted for using the equity method. Under this method, the Company
recognizes the Companys proportionate share in the income or loss of the associated company from the date that significant influence commences until the date that significant influence
ceases. When the Company’s share of loss exceeds the carrying amount of the associated company, the carrying amount is reduced to nil and recognition of further losses is
discontinued except to the extent that the Company has guaranteed obligations of the associated company or committed to provide further financial support to the associated
company.
On a continuous basis, but no less frequently than at the end of each year, the Company evaluates the carrying amount of its ownership interests in investee companies for possible
impairment. Factors considered in assessing whether an indication of other-than-temporary impairment exists include the achievement of business plan objectives and milestones
including cash flow projections and the results of planned financing activities, the financial condition and prospects of each investee company, the fair value of the ownership interest
relative to the carrying amount of the investment, the period of time the fair value of the ownership interest has been below the carrying amount of the investment and other relevant
factors. Impairment to be recognized is measured based on the amount by which the carrying amount of the investment exceeds the fair value of the investment. Fair value is determined
based on quoted market prices if any, projected discounted cash flows or other valuation techniques as appropriate.
Changes in the value of investments due to changes in the equity of associated companies arising from capital transactions of such associated companies with other parties are
recognized directly in equity and are reported as “Difference due to change of equity in associated companies” in the stockholders’ equity section. Differences previously credited
directly to equity as a result of equity transactions in associated companies are released to the statement of income upon the sale of an interest in the associate in proportion with percentage
of the interest sold. The functional currency of PT Pasifik Satelit Nusantara and PT Citra Sari Makmur is the U.S.
Dollar. For the purpose of reporting these investments using the equity method, the assets and liabilities of these companies as of the balance sheet date are translated into Indonesian Rupiah
using the rates of exchange prevailing at that date, while revenues and expenses are translated into Indonesian Rupiah at the average rates of exchange for the year. The resulting translation
adjustments are reported as part of “Translation adjustment” in the stockholders’ equity section.
