Leases SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

PT XL AXIATA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2007, 2008 AND 2009; AND 31 MARCH 2009 AND 2010 Expressed in millions of Rupiah, unless otherwise stated Page 17

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

i. Intangible assets

The 3G spectrum license is recorded at historical cost refer to Note 1d. It has a finite useful life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight- line method over the estimated useful life of the asset 10 ten years. The amortisation commences from the date when the assets are available for use and amortisation costs are charged to operating expenses. The accounting principles generally accepted in Indonesia do not provide clear and explicit guidance on whether the commitment to pay annual fees over 10 ten years as a consequence of obtaining the 3G spectrum license is a liability and whether the ten-year annual fees biaya hak penggunaan or BHP are to be considered as part of the acquisition costs of the license. The management assesses that continuation of payment of annual fees will no longer be required if the Company no longer uses the license. The management considers the annual payment as a usage fee based on its own interpretation of the license conditions and written confirmation from the Directorate General of Post and Telecommunications. These annual fees are therefore not considered as part of the acquisition cost for obtaining the license. If in future, the regulations and conditions with regard to payment of the annual fees are changed with the consequence that payment of remaining outstanding annual fees cannot be avoided upon the Company returning the license, the Company will recognise the fair value of annual fees as an intangible asset and the corresponding liability at the present value of the remaining annual fees at that point in time.

j. Loans

Loans are initially recognised at the amount of proceeds received, net of transaction costs incurred. Loans are subsequently stated at any difference between proceeds received net of transaction costs incurred and the redemption value. Transaction costs incurred as the result of the loans’ issue are stated as amortised cost using the effective interest method over the period of borrowings.

k. Bond and share issue costs

Bond issue costs are directly deducted from the issue proceeds in the consolidated balance sheets as a discount and are amortised using the effective interest method over the period of the bonds. Share issue costs are directly deducted from the additional paid-in capital account in the consolidated financial statements.

l. Derivative financial instruments

In implementing its risk management policies, the Company periodically enters into derivative contracts with external counterparties. In accordance with policy, the Company does not hold or acquire derivative instruments for speculative purposes. PT XL AXIATA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2007, 2008 AND 2009; AND 31 MARCH 2009 AND 2010 Expressed in millions of Rupiah, unless otherwise stated Page 18

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