Basis of preparation of the consolidated financial statements New and revised accounting standards and interpretations

ª u r p r o F Il E o u r M E SSA g E S o u r B u S In E S S o u r pE o pl E o u r g o v Ern A n C E o ur C o M M un IT IE S o u r I n v E S T o r S o u r F In An C E S « DAro EnErgy 2013 AnnuAl rEporT 167 PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2013 AND 2012 Expressed in thousands of ¬ S Dollars, unless otherwise stated

1. GENERAL continued

f. Mining Business Permits continued

Decree Permit Period No Number Date By Type Holder Years Location 5 No. 540.1K.490 HKV2010 21 May 2010 Regent of East Kutai IUPOP TEC 28 East Kutai Regency, East Kalimantan Province 6 No. 540.1K.665 HKVIII2012 6 August 2012 Regent of East Kutai IUPOP KBK 20 East Kutai Regency, East Kalimantan Province 7 No. 540.1K.666 HKVIII2012 6 August 2012 Regent of East Kutai IUPOP BKS 20 East Kutai Regency, East Kalimantan Province 8 No. 540.1K.545HKVI 2013 11 June 2013 Regent of East Kutai IUPOP TPP 20 East Kutai Regency, East Kalimantan Province 9 No. 540.1K.546HKVI 2013 11 June 2013 Regent of East Kutai IUPOP BPS 20 East Kutai Regency, East Kalimantan Province 10 No. 188.4583Kum Tahun 2009 8 April 2009 Regent of Balangan IUPOP PCS 20 Balangan Regency, South Kalimantan Province 11 No. 188.45131Kum Tahun 2009 21 July 2009 Regent of Balangan IUPOP SCM 20 Balangan Regency, South Kalimantan Province 12 No. 188.45215Kum Tahun 2009 16 December 2009 Regent of Balangan IUPE LSA 6 Balangan Regency, South Kalimantan Province IUPOP: Operation and Production Mining Business Permit IUPE:Exploration Mining Business Permit

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Presented below are the significant accounting policies adopted in preparing the consolidated financial statements of the Group. These policies have been consistently applied to all the years presented, unless otherwise stated.

a. Basis of preparation of the consolidated financial statements

The Group’s consolidated financial statements have been prepared in conformity with Indonesian Financial Accounting Standards and Decree of the Chairman of Bapepam-LK No. KEP-347BL2012 dated 25 June 2012 regarding the Presentation and Disclosure of Financial Statements of Issuers or Public Companies. The consolidated financial statements have been prepared on the basis of the historical cost convention, as modified by certain derivative instruments, and using the accrual basis except for the consolidated statements of cash flows. The preparation of consolidated financial statements in conformity with Indonesian Financial Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement when applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3. 168 ­ ®¯ IABlE, STrong, EFFICIEnT PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2013 AND 2012 Expressed in thousands of ° S Dollars, unless otherwise stated

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

b. New and revised accounting standards and interpretations

The revisions to SFAS No. 38, “Business Combinations on Entities under Common Control”, SFAS No. 60 Financial Instruments: Disclosure, and withdrawal of SFAS No. 51, “Quasi Reorganisation” with an effective date of 1 January 2013 did not result in changes to the Group’s accounting policies and had no effect on the amounts reported for the current or prior years. The implementation of IFAS No. 21, “Agreements for Construction for Real Estate” and the withdrawal of SFAS No. 44, “Accounting for Real Estate Development Activities”, which would previously have been mandatorily applied and withdrawn as at 1 January 2013, have been postponed until further notice by the Indonesian Financial Accounting Standards Board. Management believes that the implementation and the withdrawal of the above Interpretation and Standard will not impact the Group’s consolidated financial statements. There are no statements of financial accounting standards or interpretations of statements of financial accounting standards that are effective for the first time for financial year beginning on 1 January 2014 that would be expected to have a material impact on the Group’s consolidated financial statements, except for the following: - IFAS No. 29, “Stripping Costs in the Production Phase of a Surface Mining” IFAS No. 29 sets out the accounting for overburden waste removal stripping costs in the production phase of a surface mine. The interpretation amends the current “life-of-mine average” approach promulgated under SFAS No. 33 Revised 2011, “Stripping Activities and Environmental Management in General Mining”. The interpretation requires the entities to recognise a stripping activity asset if, and only if, all of the following criteria are met: 1. It is probable that the future economic benefit improved access to the ore body associated with the stripping activity will flow to the entity; 2. The entity can identify the component of the ore body for which access has been improved; and 3. The costs relating to the stripping activity associated with that component can be measured reliably. As such, the interpretation requires mining entities to write off existing stripping assets to opening retained earnings if the assets cannot be attributed to an identifiable component of the ore body. The interpretation may also require entities that presently allocate their stripping costs as a production cost to revisit their approach and capitalise a portion of their costs. The Group is currently assessing the impact of this interpretation on its consolidated financial statements. The following standards, interpretations and amendments to existing standards have been published and are mandatory for the Group’s consolidated financial statements for periods beginning on or after 1 January 2015: - SFAS No. 65 “Consolidated Financial Statements” - SFAS No. 66 “Joint Arrangements” - SFAS No. 67 “Disclosure of Interests in Other Entities” - SFAS No. 68 “Fair Value Measurement” - SFAS No. 1 Revised 2013 “Presentation of Financial Statements” - SFAS No. 4 Revised 2013 “Separate Financial Statements” - SFAS No. 15 Revised 2013 “Investment in Associates and Joint Ventures” - SFAS No. 24 Revised 2013 “Employee Benefits” As at the authorisation date of these consolidated financial statements, the Group is still evaluating the potential impact of these new and revised SFAS. ± u r p r o F Il E o u r M E SSA g E S o u r B u S In E S S o u r pE o pl E o u r g o v Ern A n C E o ur C o M M un IT IE S o u r I n v E S T o r S o u r F In An C E S ² DAro EnErgy 2013 AnnuAl rEporT 169 PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2013 AND 2012 Expressed in thousands of ³ S Dollars, unless otherwise stated

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

c. Principles of consolidation