PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued DECEMBER 31, 2004 AND 2005, AND FOR YEARS ENDED
DECEMBER 31, 2004 AND 2005 Figures in tables are presented in millions of Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
v. Use of estimates
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such
estimates and assumptions include the carrying amount of property, plant and equipment and intangible assets, valuation allowance for receivables and obligations related to employee benefits.
Actual results could differ from those estimates.
3. TRANSLATION OF RUPIAH INTO UNITED STATES DOLLARS
The consolidated financial statements are stated in Indonesian Rupiah. The translations of Indonesian Rupiah amounts into United States Dollars are included solely for the convenience of the readers and
have been made using the average of the market buy and sell rates of Rp9,830 to US1 published by Reuters on December 31, 2005. The convenience translations should not be construed as
representations that the Indonesian Rupiah amounts have been, could have been, or could in the future be, converted into United States Dollars at this or any other rate of exchange.
4. CHANGES IN METHODS OF ACCOUNTING
a. Employee Benefits
In June 2004, the Indonesian Financial Accounting Standards Board issued PSAK No. 24 Revised 2004, “Employee Benefits” PSAK 24R, which is a revision of PSAK No. 24, “Accounting for
Pension Benefits.” PSAK 24R changes, for the Company, the method of accounting for its employee benefit plans by requiring the vested portion of prior service cost be immediately
recognized and that the cumulative unrecognized actuarial gain or loss exceeding ten percent of the greater of the present value of the projected benefit obligation and the fair value of plan assets be
amortized over the expected average remaining working lives of the employees participating in the plan.
PSAK 24R requires the Company to adopt its provisions retrospectively as of January 1, 2004, the “Transition Date” by way of the recognition of: i a liability computed in accordance with the
provisions of PSAK 24R determined as of the Transition Date the “Transition Liability” and ii the difference between the Transition Liability and the liability previously recognized for
employee benefits as of the same date pursuant to then in effect accounting standards, as a cumulative effect of a change in method of accounting in stockholders’ equity. Accordingly, the
Company has restated its accompanying consolidated balance sheet as of the Transition Date by increasing its liability for employee benefits previously reported by Rp3,218,724 million with a
corresponding decrease in consolidated stockholders’ equity of Rp2,618,665 million, net of tax of Rp600,059 million. In addition, the adoption of PSAK 24R effective as of January 1, 2004, has
resulted in an increase to previously reported net income for the year ended December 31, 2004 in the amount of Rp485,359 million, net of tax of Rp175,454 million.
