SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued z. Provision

PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the three month periods Ended March 31, 2017 and 2016 unaudited Figures in tables are expressed in billions of Rupiah, unless otherwise stated 32 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued ab. Critical Accounting Estimates and Judgements continued i. Retirement benefits The present value of the retirement benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost income for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of the retirement benefit obligations. The Group determines the appropriate discount rate at the end of each reporting period. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the obligations. In determining the appropriate discount rate, the Group considers the interest rates of Government bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement benefit obligations. If there is an improvement in the ratings of such Government bonds or a decrease in interest rates as a result of improving economic conditions, there could be a material impact on the discount rate used in determining the post-employment benefit obligations. Other key assumptions for retirement benefit obligations are based in part on current market conditions. Additional information is disclosed in Notes 29 and 30. ii. Useful lives of property and equipment The Group estimates the useful lives of its property and equipment based on expected asset utilization, considering strategic business plans, expected future technological developments and market behavior. The estimates of useful lives of property and equipment are based on the Group’s collective assessment of industry practice, internal technical evaluation and experience with similar assets. The Group reviews its estimates of useful lives at least each financial year-end and such estimates are updated if expectations differ from previous estimates due to changes in expectation of physical wear and tear, technical or commercial obsolescence and legal or other limitations on the continuing use of the assets. The amounts of recorded expenses for any year will be affected by changes in these factors and circumstances. A change in the estimated useful lives of the property and equipment is a change in accounting estimates and is applied prospectively in profit or loss in the period of the change and future periods. Details of the nature and carrying amounts of property and equipment are disclosed in Note 9. iii. Provision for impairment of receivables The Group assesses whether there is objective evidence that trade and other receivables have been impaired at the end of each reporting period. Provision for impairment of receivables is calculated based on a review of the current status of existing receivables and historical collection experience. Such provisions are adjusted periodically to reflect the actual and anticipated experience. Details of the nature and carrying amounts of provision for impairment of receivables are disclosed in Note 5. iv. Income taxes Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the year in which such determination is made. Details of the nature and carrying amounts of income tax are disclosed in Note 26. PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the three month periods Ended March 31, 2017 and 2016 unaudited Figures in tables are expressed in billions of Rupiah, unless otherwise stated 33

3. CASH AND CASH EQUIVALENTS

The breakdown of cash and cash equivalents is as follows: March 31, 2017 December 31, 2016 Balance Balance Currency Original currency in millions Rupiah equivalent Original currency in millions Rupiah equivalent Cash on hand Rp - 41 - 10 Cash in banks Related parties PT Bank Mandiri Persero Tbk “Bank Mandiri” Rp - 867 - 1,897 US 34 456 41 548 JPY 6 1 6 1 EUR 1 11 1 11 HKD 1 1 1 1 AUD PT Bank Negara Indonesia Persero Tbk “BNI” Rp - 716 - 581 US 10 134 6 84 EUR 5 72 5 68 SGD PT Bank Rakyat Indonesia Persero Tbk “BRI” Rp - 115 - 95 US 7 93 8 107 Others Rp - 10 - 22 US Sub-total 2,476 3,415 Third parties The Hongkong and Shanghai Banking Corporation Ltd. “HSBC” US 12 156 13 176 HKD 2 4 2 4 Standard Chartered Bank “SCB” Rp - - US 7 89 6 74 SGD 1 10 5 43 PT Bank Permata Tbk “Bank Permata” Rp - 13 - 14 US 5 67 7 96 Development Bank of Singapore ”DBS” Rp - 84 - 101 US PT Bank Muamalat Indonesia Tbk “Bank Muamalat” Rp - 78 - 6 US 1 2 24 PT Bank CIMB Niaga Tbk “Bank CIMB Niaga” Rp - 80 - 37 US 1 4 Others each below Rp75 billion Rp - 115 - 114 US 4 52 3 41 SGD EUR 1 1 AUD 1 12 TWD 4 2 3 1 MYR HKD MOP 3 4 1 Sub-total 757 749 Total cash in banks 3,234 4,164 Time deposits Related parties BRI Rp - 3,705 - 4,076 US 42 561 47 632 BNI Rp - 8,784 - 4,043 US 23 302 25 336 PT Bank Tabungan Negara Persero Tbk “Bank BTN” Rp - 2,753 - 3,356 Bank Mandiri Rp - 2,041 - 1,552 US 5 67 5 67 Sub-total 18,213 14,062 PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the three month periods Ended March 31, 2017 and 2016 unaudited Figures in tables are expressed in billions of Rupiah, unless otherwise stated 34

3. CASH AND CASH EQUIVALENTS continued