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
79
34. FINANCIAL ASSETS AND LIABILITIES CONTINUED
Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, other than in a forced or liquidation sale. Fair values are
obtained from quoted market prices, discounted cash flow models and option pricing models, as appropriate. The Group uses the following hierarchy for determining the fair value of financial instruments:
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 value measured based on valuation techniques for which inputs which have a significant effect on the recorded fair value are not based on observable market data.
The following methods and assumptions are used to estimate the fair value of each class of financial instruments: a Short-term financial assets and liabilities
Short-term financial instruments with remaining maturities of one year or less cash and cash equivalents, trade receivables, other receivables, other current financial assets, short-term bank loans, trade payables to third parties,
other payables, accrued expenses, due to related parties, downpayments received and security deposits – customer deposits, current maturities of long-term debts, and liability for short-term employee benefits approximate
their carrying amounts due to their short-term nature.
b Non-current financial assets and long-term financial liabilities Long-term financial instruments consist of other receivables, due from related parties, long term debts – net of
current maturities, other payables, bonds payable and sukuk ijarah, due to related parties, downpayments received and security deposits – customer deposits, and other non-current financial assets and liabilities. The fair value of
these financial instruments cannot be measured reliably since they have no fixed repayment dates; therefore, they are measured at cost, while the fair values of deposits received - customer deposits and other non-current financial
assets are determined by discounting future cash flows using applicable rates from observable current market transactions for instruments with similar terms, credit risk and remaining maturities. Long-term debts – net of
current maturities, bonds payable and sukuk ijarah are measured at amortized cost.
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial liabilities consist of short-term bank loans, trade payables to third parties, other payables, accrued expenses, due to related parties, downpayments received and security deposits - customer deposits, long-term
debts, bonds payable and sukuk ijarah, liability for short-term employee benefits and other current and non-current financial liabilities. The main purpose of the financial liabilities is to raise working capital for the Group’s operations and
investment activities. The Group has various financial assets, such as cash and cash equivalents, trade receivables, other receivables, due from related parties and other current and non-current financial assets which arise directly from
its operations. The main risks arising from the Group’s financial instruments are market risk including foreign currency risk and
commodity price risk, interest rate risk, credit risk and liquidity risk. The management reviews and approves policies for managing each of these risks, which are described in more detail as follows:
a Foreign currency risk The Group does not significantly use foreign currencies because nearly all of its transactions, assets and liabilities
are denominated in Rupiah. The Group’s reporting currency is the Rupiah. It faces foreign exchange risk in cases of imported purchases of
equipment and building equipment, but these are not material, so the effect of foreign currency risk, such as the U.S. Dollar, European Euro and Singapore Dollar is not significant.
The Group does not have any formal hedging policy for foreign exchange exposure. If needed, hedging will be obtained to reduce risk to foreign currency risk. Transactions in foreign currencies other than in connection with
regular operations is maintained at an acceptable minimum level.
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
80
35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
