PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 513
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013
Expressed in thousands of US Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
h.
Financial assets continued h.4. Impairment of financial assets carried at amortised cost continued
For the loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flow excluding future credit losses that have
not yet been incurred discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan has a floating interest rate,
the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value
using an observable market price.
If, during a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised such as an improvement in the debtor’s
credit rating, the reversal of the previously recognised impairment loss is recognised in profit or loss.
i. Derivative financial instruments and hedging activities
Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair values. The method of recognising the resulting gain or loss
depends on whether the derivative is designated as a hedging instrument and, if so, on the nature of the item being hedged. The Group designates certain derivatives as either a hedges of the fair value of recognised assets or liabilities
or a firm commitment fair value hedge; or b hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction cash flow hedge.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedging items, as well as its risk management objectives and strategy for undertaking hedge transactions. The Group also
documents its assessment, both at the hedge inception and on an ongoing basis, of whether the derivatives used in hedging transactions are highly effective in offsetting changes in the fair value or cash flow from hedged items.
The full value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item
is less than 12 months.
i fair value hedge
Changes in the fair values of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the
hedged risk. The gain or loss relating to the effective portion of such a fair value hedge is recognised in profit or loss in the same line of changes as the fair value of the hedge items to which it is charged. The gain or loss relating
to the ineffective portion is recognised immediately in profit or loss.
ii cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Amounts accumulated in other comprehensive income within equity are reclassified to profit or loss in the period when the hedged item affects profit or loss. The gain or loss relating to the effective portion of the cash flow hedge
is recognised in profit or loss in the same line as the hedged items to which it is usually charged. However, when the forecast transaction that is being hedged against results in the recognition of a non-financial asset for
example, inventory or fixed assets, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised
in cost of revenue in the case of inventory or in depreciation in the case of fixed assets. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity is immediately transferred to profit or loss.
Changes in the fair value of any derivative instruments that are not designated or do not qualify for hedge accounting are recognised immediately in profit or loss.
165
AdARo ENERgy 2014 ANNuAl REPoRT
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 514
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013
Expressed in thousands of US Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
j.
Fixed assets
Land rights are recognised at cost and not depreciated. Initial legal costs incurred to obtain legal rights are recognised as part of the acquisition cost of the land and these cost
are not depreciated. Costs related to the renewal of land rights are recognised as intangible assets and amortised over the contractual life of the land rights.
Fixed assets are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. Fixed assets, except for the fixed assets of Adaro, are depreciated using the straight-
line method to their residual values over their expected useful lives as follows:
Years Buildings
20 Infrastructure
5 - 30 Power plant
25 Machinery, operational equipment and vehicles
4 - 10 Vessels
5 - 25 Project equipment
4 Mining equipment
4 Office equipment
4 The fixed assets of Adaro are depreciated using the straight-line method over the lesser of the estimated useful lives of
the assets, the life of the mine or the term of the CCA, stated as follows: Years
Buildings 8 - 20
Machinery, operational equipment and vehicles 2 - 10
Office equipment 10
Crushing and handling facilities 8 - 30
Roads and bridges 8 - 30
Stockpile facilities 8 - 20
Dock facilities 9 - 20
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. The carrying amounts of replaced parts are derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Assets’ useful lives, residual values and depreciation methods are reviewed and adjusted if appropriate, at the end of each financial year. The effects of any revisions are recognised in profit or loss, when the changes arise.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount Note 2l.
For assets which are no longer utilised or sold or surrendered to the Government, the carrying amounts are eliminated from the consolidated financial statements and the resulting gains or losses on disposals of fixed assets are recognised
in profit or loss. The accumulated costs of the construction of buildings and plants, production facilities and the installation of
machinery are capitalised as construction in progress. These costs are reclassified to the fixed asset accounts when the construction or installation is complete. Depreciation is charged from the date on which the assets are ready for use in
the manner intended by management.
166
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 515
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013
Expressed in thousands of US Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
k. Goodwill
