PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2005 and 2004 Expressed in rupiah, unless otherwise stated
14
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued o. Provision for Employee Benefits
i Retirement Benefits The Company has a defined contribution retirement plan Pension Plan covering all of its
qualified permanent employees and an unfunded employee benefit liability in accordance with the existing Collective Labor Agreement CLA. The provision for the CLA has been calculated
by comparing the benefit that will be received by an employee at normal pension age from the Pension Plan with the benefit as stipulated in the CLA after deducting the accumulated
employee contribution and the related investment results. If the employer-funded portion of the Pension Plan benefit is less than the benefit as required by the CLA, the Company provides for
such shortage. Prior to January 1, 2004, the Company determined its employee benefit liability under the CLA based on an actuarial valuation and amortized unrecognized past service costs
over the estimated average remaining years of service of qualified employees.
On the other hand, the Subsidiaries do not maintain any pension plan for the benefit of their employees. However, retirement benefit expenses for those Subsidiaries are accrued based on
Labor Law No. 132003 dated March 25, 2003 “the Law”.
Effective January 1, 2004, the Company decided to early adopt PSAK No. 24 Revised 2004 - Employee Benefits, on a retrospective basis and changed its previous accounting method for
employee benefits to the method required under this revised PSAK.
Under PSAK No. 24 Revised 2004, the cost of providing employee benefits under the CLALaw is determined using the projected unit credit actuarial valuation method. Actuarial
gains and losses are recognized as income or expense when the net cumulative unrecognized actuarial gains or losses for each individual plan at the end of the previous reporting year
exceed the higher of 10 of the present value of defined benefit obligation and the fair value of plan assets at that date. These gains or losses are amortized on a straight-line basis over the
expected average remaining working lives of the employees. Further, past service costs arising from the introduction of a defined benefit plan or changes in the benefit payable of an existing
plan are required to be amortized over the period until the benefits concerned become vested.
Since the difference between the benefits under this revised PSAK and the benefits recognized prior to 2004 is immaterial, the Company recorded such difference in the 2004 consolidated
statement of income see Note 20.
ii Post-retirement Healthcare Benefits In March 2005, the Company issued a policy regarding post-retirement healthcare benefits
wherein employees who reach normal retirement age as of January 1, 2003 onwards are entitled to receive healthcare benefits for 5 years from their normal retirement date. The amount
of post-retirement healthcare benefits is equivalent to the benefits limited to reimbursement for in-patient hospital bills under the same standard as that which an employee used to have prior
to his retirement, for a period not exceeding 60 days per year.
p. Foreign Currency Transactions and Balances
Transactions involving foreign currencies are recorded in rupiah at the middle rates of exchange prevailing at the time the transactions are made. At balance sheet date, monetary assets and
liabilities denominated in foreign currencies are adjusted to reflect the rates of exchange quoted at the closing of the last banking day of the year. The resulting gains or losses are credited or charged
to current operations, except for those capitalized under PSAK No. 26 see Note 2l.
PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2005 and 2004 Expressed in rupiah, unless otherwise stated
15
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued p. Foreign Currency Transactions and Balances continued
As of December 31, 2005 and 2004, the rates of exchange used are as follows:
2005 2004
Euro EUR1 11,659.87
12,652.06 U.S. dollar US1
9,830.00 9,290.00
Japanese yen JP¥100 8,342.18
9,042.26 Transactions in other foreign currencies are insignificant.
q. Derivative Instruments PSAK No. 55, “Accounting for Derivative Instruments and Hedging Activities”, established the
accounting and reporting standards which require that every derivative instrument including certain derivatives embedded in other contracts be recorded in the balance sheets as either an asset or a
liability measured at its fair value. PSAK No. 55 requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedges allow a derivative’s gain or loss to offset
related results on the hedged item in the statements of income. PSAK No. 55 also requires that an entity formally document, designate and assess the effectiveness of transactions that are accounted
for under the hedge accounting treatment.
The accounting for changes in the fair value of a derivative depends on the documented use of the derivative and the resulting designation. The Company has entered into forward and option
currency contracts to hedge market risks arising from fluctuations in exchange rates relating to its foreign currency denominated loans. However, based on the specific requirements for hedge
accounting under PSAK No. 55, the said instruments can not be designated as hedge activities for accounting purposes and accordingly, changes in the fair value of such instruments are recorded
directly in earnings.
r. Corporate Income Tax
