Adaro Energy Annual Report 2008 www.adaro.com
143
Contact Us Governing Adaro
Financial Report Corporate Social Responsibility
PT ADARO ENERGY Tbk Schedule 511
FORMERLY PT PADANG KARUNIA AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2008 AND 2007 Expressed in million Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
s. Accounting for derivative financial instruments and hedging activities
Derivative financial instruments are initially recognised in the balance sheet at cost and subsequently are remeasured at their fair value. The method of recognising the resulting gain or loss is dependent on the nature of the item being hedged. The
Group designates certain derivatives as either 1 a hedge of the fair value of a recognised asset or liability or of an unrecognised firm commitment fair value hedge; or 2 a hedge of a forecasted transaction cash flow hedge.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly effective are recorded in the consolidated statement of income, along with any changes in the fair value of the hedged asset or liability that
is attributable to the hedged risk. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised when the committed or forecasted transaction is ultimately recognised in the consolidated statement of income. When a committed or forecasted transaction is
no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated statement of income.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effective, are recognised in equity, in the fair value reserve account.
Amounts deferred in equity are subsequently released to the consolidated statement of income and classified as revenue or expense in the periods during which the hedged forecasted
transaction affects the consolidated statement of income. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in
the consolidated statement of income. At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as hedges to specific assets and liabilities or to specific firm commitments or forecast transactions.
The Group also documents its assessment, both at the hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
t. Earnings per share
Basic earnings per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period or the year.
Diluted earnings per share is computed by dividing net income adjusted for the interest expense and the foreign exchange gains or losses on convertible bonds, and its related tax effects, by the weighted-average number of issued and fully paid
shares during the period, assuming that all options have been excercised and all the convertible bonds have been converted.
u. Segment reporting
A business segment is a distinguishable component in providing a product or service which is subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component in providing
products or services within a particular economic environment that is subject to risks and returns that are different from those of components operating in other economic environments.
The Group segments its financial reporting as follows: i
business segments primary, where the Group’s business activities are classified into coal mining and trading, mining services and others power plant services and building management; and
ii geographical segments secondary in which sales are classified based on target market areas.
v. Share issuance costs
Incremental costs directly attributable to the issuance of new shares are shown in equity as a deduction, net of tax, from the proceeds.
w. Difference in value from restructuring transactions of entities under common control
Restructuring transactions among entities under common control are accounted for using the pooling -of -interests method. The difference between the transfer price and the book value of each restructuring transaction among entities under common
control is recorded under the account “difference in value from restructuring transactions of entities under common control” in the equity section of the consolidated financial statements.
144
Adaro Energy Annual Report 2008 www.adaro.com
Adaro in Summary From Us to You
Running Adaro Management Report
Owning Adaro
PT ADARO ENERGY Tbk Schedule 512
FORMERLY PT PADANG KARUNIA AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2008 AND 2007 Expressed in million Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
w. Difference in value from restructuring transactions of entities under common control continued
The balance of the account “difference in value from restructuring transactions of entities under common control” can change when:
i there are reciprocal transactions between entities under common control; ii
there is quasi-reorganisation; iii under common control status is lost between transacting entities; or
iv there is a transfer of the assets, liabilities, equity or other ownership instruments that caused the difference from restructuring transactions of entities under common to another party that is not under common control.
When changes in the balance of this account result from point i, the existing balance is netted-off with the new transaction, hence creating a new balance for the account.
When changes in the balance of the account come from point ii, then the balance is used to eliminate or add to the nega tive retained earnings balance.
When changes in the balance of the account come from points iii or iv, then the balance is recognised as realised gain or loss.
x. Dividends
Dividend distribution to the Group’s shareholders is recognised as a liability in the Group’s consolidated financial statements in the period in which the dividends are declared.
y. Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current
events and activities, actual results could differ from those estimates.
3. ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES
a. Acquisition of PT Saptaindra Sejati
On 17 December 2007, SIS increased its issued and paid in capital through the issuance of new shares. The Company acquired all 209,250 shares issued at par value of Rp 1,000,000 full amount per share, and the Company’s interest in SIS
increased from 28.57 to 71.78. The restructuring transaction of 17 December 2007 was accounted for using the pooling-of-interests method as required under
the Statement of Financial Accounting Standards No. 38 Revised 2004, “Accounting for Restructuring of Entities under Common Control” “SFAS No. 38 Revised 2004”, since the Company and SIS are entities under common control. Details of
the book value of net assets acquired and the difference arising from this restructuring transaction of entities under common control are as follows:
2007
Purchase consideration through cash payment 209,250
Book value of net assets acquired 272,235
Difference in value from restructuring transactions of entities under common control 62,985
On 31 March 2008, SIS increased its issued and paid in capital through the issuance of 56,679 new shares for the conversion of all convertible bonds issued to Joyce Corner International Ltd “Joyce”, and the difference between the converted bonds
and par value was recorded as additional paid-in capital. As a result of this new share issue, the Company’s interest in SIS decreased from 71.78 to 61.68.
On 3 April 2008, the Company increased its ownership in SIS through the acquisition of the shares of PCI, SRIS and CSP, amounting to 39,036 shares, 39,035 shares and 19,517 shares, respectively, with the total acquisition amount of Rp 158,776.
From these transactions, the Company’s interest in SIS increased from 61.68 to 85.92.
