PT SUMMARECON AGUNG Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2017 and for the Six-Month Periods Then Ended Expressed in thousands of Indonesian Rupiah, unless otherwise stated
29
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED u. Financial instruments continued
ii. Financial liabilities continued
Effective interest rate method The effective interest rate method is a method of calculating the amortized cost of a financial asset and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash flows including all fees and points received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts throughout the expected life of the financial asset, or a shorter period, where appropriate, to the net carrying amount at initial recognition of the financial
asset. Fair value hierarchy
The Group measures financial instruments, such as derivatives, at fair value at each consolidated statements of financial position date. Also, fair values of financial instruments measured at amortized cost are disclosed in the
related note. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the absence of a principal
market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of
unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 : Fair values measured based on quoted prices unadjusted in
active markets for identical assets or liabilities. Level 2
: Fair values measured based on valuation techniques for which all inputs which have a significant effect on the recorded fair values
are observable, either directly or indirectly. Level 3
: Fair values measured based on valuation techniques for which inputs which have a significant effect on the recorded fair values
are not based on observable market data. For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the
Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization based on the lowest level input that is significant to the fair value measurement as a whole at the
end of each reporting period. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis
of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
PT SUMMARECON AGUNG Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2017 and for the Six-Month Periods Then Ended Expressed in thousands of Indonesian Rupiah, unless otherwise stated
30
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED u. Financial instruments continued
