PT SAMPOERNA AGRO Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Six Months Ended June 30, 2007 and 2006
Expressed in thousands of Rupiah, unless otherwise stated
14
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued i.
Fixed assets continued The cost of repairs and maintenance is charged to expense as incurred; significant renewals or
betterments are capitalized. Interest expenses incurred in relation with loan used in constructing the assets are capitalized. When assets are retired or otherwise disposed of, their carrying value
and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the current period’s statements of income.
Construction in progress represents the accumulated cost of materials and other costs related to the asset under construction until it is ready to be used. When the asset is complete and ready for
its intended use, these costs are transferred to the relevant accounts.
j. Impairment of assets
The recoverable amount of an asset is estimated whenever events or changes in circumstances indicate that its carrying amount may not be fully recoverable. Impairment in asset value, if any,
recognized as loss in the current year’s statement of income, unless assets are carried at revalued amounts. Impairment losses on revalued assets are recognized directly against the “Assets
Revaluation Increment” for the related assets to the extent that the impairment losses do not exceed the amounts recognized in the assets revaluation increment attributable to such assets.
The amount of an impairment loss for a revalued asset which exceeds the amount of the “Assets Revaluation Increment” attributable to such asset is recognized in the current period’s statements
of income.
k. Advances investment credit for Plasma plantations
Plasma plantations is an Indonesian Government policy to develop the plantations on mutual agreements with smallholders or cooperatives. Group referred to as “Inti” can acquire land rights
to develop plantations only if they develop plantations for smallholders Plasma participants in addition to their own plantations. Inti are required to assist and supervise smallholders in technical
matters relating to the plantation and to purchase the fresh fruit bunch FFB produced by Plasma plantations at prices determined by the Indonesian Government.
Once developed, the Plasma plantations are transferred to the smallholders at a conversion rate determined by the Government, and where the conversion price might be lower than the carrying
value of the Plasma plantation transferred. Therefore, Group determine the allowance for loss on conversion based on a periodic review of the estimated difference between the carrying value of
the Plasma plantation and the conversion value. The Plasma farmers are required to sell the fresh fruit bunch to Inti.
Advances for Plasma plantations represent accumulated costs incurred including borrowing costs and indirect overhead costs to develop Plasma areas deducted mainly by the investment credit
obtained from the bank. When a Plasma plantation is complete and ready to be transferred or turned-over to the Plasma farmers, the corresponding investment credit from the bank is also
transferred to the farmers. The difference between the carrying value of the Plasma plantation and the related investment credit transferred is recognized as gain or loss and is reflected in current
period’s statements of income.
PT SAMPOERNA AGRO Tbk AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Six Months Ended June 30, 2007 and 2006
Expressed in thousands of Rupiah, unless otherwise stated
15
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
