Cash and Cash Equivalents Investments Financial Instrument

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued 02 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

b. Principles of Consolidation continued

In case of loss of control over a Subsidiary, the Group: - Derecognizes the assets including goodwill and liabilities of the Subsidiary; - Derecognizes the carrying amount of any NCI; - Derecognizes the cummulative translation differences, recorded in equity, if any; - Recognizes the fair value of the consideration received; - Recognizes the fair value of any investment retained; - Recognizes any surplus or deficit in profit or loss; and - Reclassifies the parents share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate. NCI represents the portion of the profit or loss and net assets of the Subsidiaries not attributable, directly or indirectly, to the Entity, which are presented in consolidated statements of comprehensive income and under the equity section of the consolidated statements of financial position, respectively, separately from the corresponding portion attributable to the equity holders of the parent entity. Prior to January 1, 2011 The proportionate share of the minority shareholders in net assets and net income or loss of the consolidated Subsidiaries were previously presented as minority interests in net assets of Subsidiaries in the consolidated statements of financial position and as minority interests in net loss income of Subsidiaries in the consolidated statements of comprehensive income. The losses applicable to the minority interests in a Subsidiary may have exceeded the minority interests in the equity of the Subsidiary. The excess and any further losses applicable to the minority interest were absorbed by the Entity as the majority shareholder, except to the extent that the minority interests had other long-term interest in the related Subsidiary or had binding obligations for, and were able to make good of, the losses. If the Subsidiary subsequently reported profits, all such profits were allocated to the majority interest holder, in this case, the Entity, until the minority interests share of losses previously absorbed by the Entity were recovered.

c. Foreign Currency Translation

Transactions and balances The Entity maintains its accounting records in Rupiah. Transactions in foreign currencies are recorded at the prevailing rates of exchange in effect on the date of the transactions. At the statements of financial position dates, all foreign currency monetary assets and liabilities are translated in the Rupiah currency using prevailing middle rate of Bank Indonesia on that date. The net foreign exchange gains or losses arise as the result of assets and liabilities translation in foreign currency recognized. Exchange rates used as of December 31, 2011 and 2010 are as follows: 2011 2010 United States Dollar 1Rupiah full amount 9,068 8,991 EURO 1Rupiah full amount 11,739 11,956 Hongkong Dollar 1Rupiah full amount 1,167 1,155 Singapore Dollar 1Rupiah full amount 6,974 6,981 02

c. Foreign Currency Translation continued

Translation of the financial statements of foreign Subsidiary Companies The financial statements of foreign Subsidiary companies are translated into Rupiah as follows: • Assets and liabilities are translated at prevailing rates of exchange at statements of financial position dates. • Items in the statements of comprehensive income are translated with monthly weighted average of middle rates of exchange during the year. • Equity is translated using the historical rates of exchange. • Resulting exchange differences are recorded directly against shareholders’ interest, as “Exchange difference due to financial statement translations”.

d. Revenue and Expenses Recognition

Revenue is recognized to the extent when it is probable that the economic benefits will flow to the Entity and its Subsidiaries and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: • Sale of goods Revenue is recognized when the significant risk and rewards of ownership of the goods have been passed to the buyer. • Rendering of services Revenue is recognized by reference to the stage of completion of the transaction at the consolidated statements of financial position dates and there is no significant uncertainties remain considering any associated cost. • Interest Income is recognized as the interest accrues taking into account the effective yield on the related asset, unless collectability is in doubt. • Expenses are recognized when incurred accrual basis.

e. Cash and Cash Equivalents

Cash on hand and in banks and short-term deposits held to maturity are carried at cost. Cash and cash equivalents are defined as cash on hand and in banks, demand deposits and short-term and highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purposes of the consolidated statements of cash flows, cash and cash equivalents consist of cash on hand and in banks, and short-term deposits with maturities of less than three months.

f. Investments

Short-term deposits with maturities of less than three months but held for collateral or have a restriction and short-term deposits with maturities of more than three months are presented as short-term investments and carried at nominal value.

g. Financial Instrument

Effective on January 1, 2010, the Entity and its Subsidiaries have adopted PSAK 50 revised 2006, Financial Instruments: Presentation and Disclosure, and PSAK 55 Revised 2006, Financial Instruments: Recognition and Measurement, which replaces PSAK 50, Accounting for Certain Investments in Securities and PSAK 55 revised 1999, Accounting for Derivative Instruments and Hedging Activities. PSAK 50 Revised 2006, contains requirements for the presentation of financial instruments and identifies the information that should be disclosed. Disclosure requirements apply to the classification of financial instruments, from the perspective of the issuer, in financial assets, financial liabilities and equity instruments; classification related to interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be offset. This PSAK requires disclosure of, among other things, information regarding factors that affect the amount, timing and certainty of future cash flows of an entity associated with financial instruments and the accounting policies applied to those instruments. PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 Expressed in thousands of Rupiah and in thousands of United States Dollars, unless otherwise stated 109 108 Laporan Tahunan 2011 Annual Report 2011 PT. ERATEX DJAJA Tbk PT. ERATEX DJAJA Tbk Laporan Tahunan 2011 Annual Report 2011 PT ERATEX DJAJA Tbk AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended December 31, 2011 and 2010 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

g. Financial Instrument continued