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DAro EnErgy 2013 AnnuAl rEporT
179
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 519
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2013 AND 2012
Expressed in thousands of
Ö
S Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
r. Provisions
i Provision for decommissioning, mine reclamation and closure
Restoration, rehabilitation and environmental expenditure to be incurred related to remediation of disturbed areas during the production phase are charged to cost of revenue when the obligation arising from the
disturbance occurs as extraction progresses.
These obligations are recognised as liabilities when a legal or constructive obligation has arisen from activities which have already been performed, with the initial and subsequent measurement of the obligation at the
present value of the expenditure expected to be required to settle the obligation using a pre-tax rate, that reflects current market assessments of the time value of money and the risks specific to the obligation.
Changes in the measurement of a liability which arises during production are also charged to cost of revenue, while the increase in the provision due to the passage of time is recognised as finance cost.
Decommissioning of mining assets and related post mining activities as well as abandonment and decommissioning of other long-lived assets provides for the legal obligations associated with the retirement of
mining related assets and other long lived assets including the decommissioning of building, equipment, crushing and handling system, infrastructure and other facilities that result from the acquisition, construction
or development andor the normal operation of such assets. These obligations are recognised as liabilities when a legal or constructive obligation with respect to the retirement of an asset is incurred, with the initial
and subsequent measurement of the obligation at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. An asset retirement cost equivalent to these liabilities is capitalised as part of the related asset’s carrying value and is subsequently depreciated or depleted over the
asset’s useful life. The increase in these obligations due to the passage of time is recognised as finance cost.
The changes in the measurement of decommissioning obligations that result from changes in the estimated timing or amount of the outflow of resources embodying economic benefits e.g. cash flow required to settle
the obligations, or a change in the discount rate will be added to or deducted from, the cost of the related asset in the current year. The amount deducted from the cost of the asset should not exceed its carrying amount. If a
decrease in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in profit or loss. If the adjustment results in an addition to the cost of an asset, the Group will consider whether
this is an indication that the new carrying amount of the asset may not be fully recoverable. If there is such an indication, the Group will test the asset for impairment by estimating its recoverable amount and will account
for any impairment loss incurred, if any.
ii Other provisions
Provisions for restructuring costs, legal claims, environmental issues that may not involve the retirement of an asset, reclamation and closure of mining areas and others are recognised when:
the Group has a present legal or constructive obligation as a result of past events;
it is probable that an outflow of resources will be required to settle the obligation; and
the amount can be reliably estimated.
Restructuring provision may comprise items such as lease termination penalties and employee termination payments. Provision is not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Although the likelihood of outflow for any one
item may be small, it may well be probable that some outflow of resources will be needed to settle the class of obligations as a whole. If that is the case, a provision is recognised.
180
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IABlE, STrong, EFFICIEnT
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 520
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2013 AND 2012
Expressed in thousands of
Ú
S Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
r. Provisions continued
