PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2011 and 2010 and For the Years then Ended
- 39 - Productive assets are written-off against allowance for impairment losses of productive
assets when management believes that productive assets should be written-off when the debtor is unable to pay and or difficult to recover. Recoveries of productive assets that have
been written off are recorded as an addition to allowance for impairment losses of productive asset account when received. If the amount received is more than the principal amount, the
excess is recognized as interest income. Refer to Note 2b concerning change in accounting policy on commitment and contingencies
in 2011. The Company and other subsidiaries are engaged in non-banking business
An allowance for impairment losses on receivables is provided based on management’s evaluation of the collectibility of the individual receivable account short-term investments,
securities purchased under agreements to resell, consumer financing receivables, net investment in finance lease, factoring receivables, premiums and reinsurance receivables
and other accounts receivable.
Accounting policy on allowance for impairment losses on receivables is described in Note 2i.
q. Financial Guarantee Contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss incurred because a specified debtor defaulted to
make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to bank, financial institutions and other institutions on behalf of
customers to secure loans and other banking facilities. Financial guarantees are initially recognized in the financial statements at fair value on the
date the guarantee was given. The fair value of a financial guarantee at inception is likely to equal the premium received because all guarantees are agreed on arm’s length terms and
the initial fair value is amortised over the life of the financial guarantees. Subsequently, they are measured at the higher of amortised amount and the present value
of any expected payment when a payment under the guarantee has become probable and the difference is charged to other operating expense in consolidated statement of
comprehensive income.
r. Investment Properties
Investment properties, except land, are measured at cost, including transaction costs, less accumulated depreciation and any impairment loss. The carrying amount includes the cost
of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment
property. Investment properties are derecognized when either they have been disposed of or when the
investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an
investment property are recognized in the consolidated statement of comprehensive income in the year of retirement or disposal.
Investment properties, depreciated over its estimated useful life using the straight-line method at 5 per annum.
PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2011 and 2010 and For the Years then Ended
- 40 - Transfers are made to investment properties when, and only when, there is a change in use,
evidenced by ending of owner-occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment
properties when, and only when, there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale.
s. Property and Equipment
Direct Acquisitions Property and equipment, except land, are carried at cost, excluding day-to day servicing,
less accumulated depreciation and any impairment in value. Land is not depreciated and is stated at cost less any impairment in value if any.
The initial cost of property and equipment consists of its purchase price, including import duties and taxes and any directly attributable costs in bringing the property and equipment to
its working condition and location for its intended use. Expenditures incurred after the property and equipment have been put into operations , such
as repairs and maintenance costs, are normally charged to operations in the year such costs are incurred. In situations where it can be clearly demonstrated that the expenditures have
resulted in an increase in the future economic benefits expected to be obtained from the use of the property and equipment beyond its originally assessed standard of performance, the
expenditures are capitalized as additional costs of property and equipment.
All property and equipment, except for land and buildings, are depreciated over their estimated useful lives using the double-declining-balance method. Buildings are depreciated
over their estimated useful lives using the straight-line method. The depreciation rates are as follows:
Rate Buildings:
• Permanent • Non-permanent
5 10
Property and equipment other than buildings: Class I
: Assets with useful lives of less than 4 years 50
Class II : Assets with useful lives of between 4 to 8 years
25 The carrying values of property and equipment are reviewed for impairment when events or
changes in circumstances indicate that the carrying values may not be recoverable. When each major inspection is performed, its cost is recognized in the carrying amount of
the item of property and equipment as a replacement if the recognition criteria are satisfied. Such major inspection is capitalized and amortized over the next major inspection activity.
An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. When assets are sold or retired,
the cost and related accumulated depreciation and any impairment loss are eliminated from the accounts. Any gains or loss arising from derecognition of property and equipment
calculated as the difference between the net disposal proceeds, if any, and the carrying amount of the item is included in the consolidated statement of comprehensive income in
the year the item is derecognized.
The asset’s residual values, useful lives and depreciation method are reviewed and adjusted if appropriate, at each financial year end.
PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2011 and 2010 and For the Years then Ended
- 41 - Construction in Progress
Construction in progress represents property and equipment under construction which is stated at cost and is not depreciated. The accumulated costs will be reclassified to the
respective property and equipment account and will be depreciated when the construction is substantially complete and the asset is ready for its intended use.
t. Assets for Lease
Assets for lease are stated at cost, less accumulated depreciation and any impairment in value if any. Accounting policy for assets for lease is the same with directly acquired
property and equipment Note 2s. Rental income is presented under “Operating lease income” account in the consolidated statements of comprehensive income over the lease
period Note 2m.
u. Property under Build, Operate and Transfer BOT Agreement
Property under build, operate and transfer agreement is an asset, the development of which, was funded by the Company until the asset is ready for operation and then managed by the
Company until such time the asset will be transferred to asset holders at the end of concession period.
Property under build, operate and transfer agreement in progress is stated at cost and not depreciated. Accumulated costs will be transferred to property under build, operate and
transfer account and will be depreciated when the asset is ready for use.
v. Prepaid Expenses
Prepaid expenses are amortized over their beneficial or contract periods using the straight- line method.
w. Foreclosed Properties
Foreclosed properties are stated at the lower of carrying amount and fair value less costs to sell. The difference between between the value of the foreclosed properties
and the outstanding loan principal, if any, is changed to the current year consolidated statement of comprehensive income. The difference between the carrying value of the
foreclosed property and the proceeds from its sale is recognized as a gain or loss in the period the property was sold.
The costs of maintenance of foreclosed properties are charged to consolidated statement of comprehensive income when incurred.
The carrying amount of the property is written-down to recognize a permanent dimunition in value of the foreclosed property, which is charged to the current year consolidated statement
of comprehensive income. Refer to Note 2b concerning change in accounting policy on allowance for impairment of
non-productive assets in 2011.
x. Impairment of Non-Financial Assets
The Group assesses at each annual reporting period whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing
for an asset i.e. an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination is required, the Group
makes an estimate of the asset’s recoverable amount.
