SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
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h. Trade Receivables
Trade receivables are recognized and carried at original invoice amount less provision for declining in value. A provision for declining in value is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.
i. Inventories
Inventories are stated at cost or net realizable value, whichever is lower. Cost is based on the average method and comprises all costs of purchase, costs of conversion and other costs incurred in
bringing the inventory to its present location and condition. Finished goods and goods in process are including fixed and variable factory overhead in addition to direct materials and labor.
Net realizable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.
Inventory provision are determined by the calculation of inventory value by the end of the accounting period.
j. Lease
Effective January 1, 2008, the Statement of Financial Accounting Standard PSAK No. 30 Revised 2007, Leases supersedes PSAK No. 30 1990. Based on PSAK No. 30 Revised 2007, the determination of whether an arrangement is, or
contains a lease is based on the substance of the arrangement at inception date and whether the fulfillment of the arrangement is depend on the use of a specific asset and the arrangement conveys a right to use the asset. Under this
revised PSAK, leases that transfer substantially to the lessee all the risks and rewards incidental to ownership of the leased item are classified as finance leases. Moreover, leases which do not transfer substantially all the risks and rewards incidental
to ownership of the leased item are classified as operating leases.
Based on PSAK No. 30 Revised 2007, under a finance lease, the Entity recognize assets and liabilities in its consolidated statements of financial position at amounts equal to the fair value of the leased property, if lower, the present value of the
minimum lease payments, each determined at inception of the lease. Minimum lease payments are apportioned between the finance expenses and the reduction of outstanding liability. The finance expenses is allocated to each period during the
lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rent are changed as expenses in the periods in which they are incurred. Finance expenses are reflected in profit and loss. Capitalized
leased assets presented under the account of property, plant and equipment are depreciated over the shorter of the estimated useful life of the assets and the lease term, if there is no reasonable certainty that the Entity will obtain ownership
by the end of the lease term. Under an operating lease, the Entity recognized lease payments as an expense on a straight- line method over the lease term.
k. Fixed Assets
As of January 1, 2009, the Entity has been implemented PSAK No. 16 Fixed Assets Revised 2007 as determined by the Indonesian Institute of Accountants. The Company has decided to use cost method concerned to the fixed assets
accounting policy. Depreciation is computed using the straight-line method based on their estimated useful lives of the assets except land as
follows: Buildings and structures
25 years Machinery and equipment
15 years Vehicles
10 years Furniture and fixtures
10 years
k. Fixed Assets continued
The cost of repair and maintenance is charged to income as incurred; significant renewals or betterments are capitalized. When assets are retired or otherwise disposed of, their carrying values and the related accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in earnings. Fixed assets which are not in used, will be classified as asset held for sale.
Construction in progress represents the accumulated costs of materials and other costs related to the construction of fixed asset. The accumulated costs will be reclassified to the appropriate fixed asset account when the construction is completed
and the asset is ready for its intended use.
l. Impairment of Assets
At each statements of financial position date, the Entity and its Subsidiaries review whether there is any indication of asset impairment or not.
Fixed assets and other assets, including intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount
by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an assets net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows.
m. Intangible Assets
The expense incurred in relation to the extension of land-rights are capitalized and amortized over the lifetime of the land- rights which is 20 years.
The expense incurred in relation to the acquisition of software are capitalized and amortized over 10 years. As of each statements of financial position date, the Entity and its Subsidiaries assess whether there is any indication of
impairment. If any such indication exists, the recoverable amount is estimated.
n. Related Parties