Schedule 514 PT BAYAN RESOURCES AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 MARCH 2008 AND 2007 AND 31 DECEMBER 2007, 2006 AND 2005
Expressed in million Indonesian Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued h. Fixed assets
Fixed assets are stated at cost of acquisition, less accumulated depreciation. Fixed assets, except land, are depreciated from the month the assets are placed in to service using the straight-line method to their estimated
residual value over the lesser of the estimated useful lives of the assets, the life of mine or the CCoW or Mining Rights terms as follows:
Years 2008 and 2007
2006 and 2005
Buildings and port facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-20
4-20 Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4-10 4-8
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4 Office furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 4
Other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4 Repairs and maintenance are charged to expense in the period incurred. Expenditures which extend the
useful life of assets are capitalised and depreciated over the remaining useful life of the related assets. When assets are retired or otherwise disposed of, their carrying values and the related accumulated
depreciation are eliminated from the consolidated financial statements, and the resulting gains and losses on the disposal of fixed assets are recognised in the consolidated statements of income.
The accumulated costs of the construction of buildings and port facilities and the installation of machinery are capitalised as construction in progress. These costs are reclassified to fixed asset accounts when
the construction or installation is complete. The point in time when depreciation commences and is charged to expense can be determined as follows:
‰ for fixed assets directly used in the production process, depreciation is calculated when commercial production commences and the depreciation cost is expensed as production costs.
‰ for fixed assets not directly used in the production process, depreciation commences when the construction of the fixed assets is completed and the depreciation cost is expensed as part of operating
expense in the current period. Interest and other borrowing costs, such as discount fees on loans either directly or indirectly used in
financing construction of a qualifying asset, are capitalised up to the date when construction is complete. For borrowings directly attributable to a qualifying asset, the amount to be capitalised is determined as the actual
borrowing costs incurred during the periodyear, less any income earned on the temporary investment of such borrowings. For borrowings that are not directly attributable to a qualifying asset, the amount to be capitalised is
determined by applying a capitalisation rate to the amount expended on the qualifying asset. The capitalisation rate is the weighted-average of the borrowing costs applicable to the total borrowings outstanding during the
period, excluding borrowings directly attributable to financing the qualifying asset under construction.
i. Fixed assets under finance leases
Fixed assets acquired by means of finance leases are presented at the present value of the minimum lease payments plus purchase option that will be paid by the Group at the end of the lease period. A
corresponding liability is also established and each lease payment is allocated between the liability and finance charges. The assets are depreciated similarly to owned assets.
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Schedule 515 PT BAYAN RESOURCES AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 MARCH 2008 AND 2007 AND 31 DECEMBER 2007, 2006 AND 2005
Expressed in million Indonesian Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued j. Deferred exploration and development expenditures
Exploration expenditure incurred is capitalised and carried forward, on an area of interest basis, provided one of the following conditions is met:
i Such costs are expected to be recouped through successful development and exploitation of the area of interest or, alternatively, by its sale; or
ii Exploration activities in the area of interest have not yet reached the stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active
and significant operations in or in relation to the area are continuing. Ultimate recoupment of exploration expenditure carried forward is dependent upon successful
development and commercial exploitation, or alternatively, sale of the respective area. Each area of interest is reviewed at the end of each accounting period. Exploration expenditure in respect of an area of interest, which
has been abandoned, or for which a decision has been made by the Group’s directors against the commercial viability of the area of interest are written-off in the period the decision is made.
Mine development expenditure and incorporated costs in developing an area of interest prior to commencement of operations in the respective area, as long as they meet the criteria for deferral, are capitalised.
Deferred exploration and development expenditure represents the accumulated costs relating to general investigation, administration and licensing, geology and geophysics expenditures and costs incurred to develop a
mine before the commencement of the commercial operations. Deferred exploration and development expenditure is amortised over mine life using the straight line
method from the commencement of commercial production, as appropriate. Interest and other borrowing costs, such as discount fees on loans either directly or indirectly used in
financing exploration and development activities, as long as they meet the criteria for deferral, are capitalised up to the date when the exploration and development activities are complete. For borrowings directly attributable to
a specific activity, the amount to be capitalised is determined as the actual borrowing costs incurred during the period, less any income earned on the temporary investment of such borrowings. For borrowings that are not
directly attributable to a specific activity, the amount to be capitalised is determined by applying a capitalisation rate to the amount expended on the exploration and development activities. The capitalisation rate is the
weighted-average of the borrowing costs applicable to the total borrowings outstanding during the period, excluding borrowings directly attributable to financing the relevant exploration and development activities.
k. Impairment of long lived assets
At balance sheets date, the Group undertakes a review to determine whether there is any indication of asset impairment.
Fixed assets and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which an asset’s carrying amount exceeds its recoverable amount, which is the higher of an asset’s net selling price or value in use. For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable cash flows. Reversal of an impairment provision is recorded as income in the period when the reversal occurs.
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