Taxation Provision for employee service entitlements

k. Fixed Assets

As of January 1, 2009, the Company has been implemented PSAK No. 16 Fixed Assets Revised 2007 as determined by the Indonesian Institute of Accountants. The Company has decided to use cost method concerned to the fixed assets accounting policy. Depreciation is computed using the straight-line method based on their estimated useful lives of the assets except land as follows: Buildings and structures 25 years Machinery and equipment 15 years Vehicles 10 years Furniture and fixtures 10 years The cost of repair and maintenance is charged to income as incurred; significant renewals or betterments are capitalized. When assets are retired or otherwise disposed of, their carrying values and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in earnings. Fixed assets which are not in used, will be classified as asset held for sale. Construction in progress represents the accumulated costs of materials and other costs related to the construction of fixed asset. The accumulated costs will be reclassified to the appropriate fixed asset account when the construction is completed and the asset is ready for its intended use.

l. Impairment of Assets

At each balance sheet date, the Company and subsidiaries review whether there is any indication of asset impairment or not. Fixed assets and other assets, including intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an assets net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

m. Intangible Assets

The expense incurred in relation to the extension of land-rights are capitalized and amortized over the lifetime of the land- rights which is 20 years. The expense incurred in relation to the acquisition of software are capitalized and amortized over 10 years. As of each balance sheet date, the Company and its Subsidiaries assess whether there is any indication of impairment. If any such indication exists, the recoverable amount is estimated.

n. Related Parties

In the ordinary course of business, the Company has transactions with entities which are regarded as having special relationship as defined under PSAK No. 7, “Related Party Disclosures”. All significant transactions and balances with related parties are disclosed in the notes to the consolidated financial statements. 02 02 02 02 PT. ERATEX DJAJA Tbk 2010 Annual Report 041 040 PT. ERATEX DJAJA Tbk 2010 Annual Report PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2010 and 2009 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2010 and 2009 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

o. Taxation

Under PSAK No.46, current tax expenses will be determined based on profit subject to tax for the current period and calculated using the currently applying tax rates. Deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. Future tax benefits, such as the carry-forward of unused tax losses, are also recognized to the extent that realization of such benefits is probable. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Amendments to tax obligations are recorded when an assessments is received or, if appealed against by the Company, when the result of the appeal is determined. Indonesian tax regulations do not apply a concept of consolidated tax returns. Therefore, the tax balances in the consolidated financial statements represent the combination of the Company’s and its Subsidiaries tax position.

p. Provision for employee service entitlements

The Company recognizes an unfunded employee benefit liability in accordance with Labor Law No. 132003 dated March 25, 2003 “the Law”. Before January 1, 2005, the Company recognized employee benefits obligations based on the actuary assessment under PSAK No.24 Cost Benefit Pension Accounting published in 1994. Under PSAK No. 24 Revised 2004, Employee Benefit, the cost of providing employee benefit under the Law is determined using the projected unit credit actuarial valuation method based on projected unit credit. Actuarial gains and losses are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses for each individual plan at the end of the previous reporting year exceeded 10 of the defined benefit obligation and 10 of the fair value of plan assets. These gains or losses are recognized on a straight-line method of the expected average remaining working lives of the employees. Further, past-service costs arising from the introduction of a defined benefit plan or changes in the benefit payable of an existing plan are required to be amortized over the period until the benefits concerned become vested.

q. Discontinuing operation