PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 2006 and 2005 Expressed in rupiah, unless otherwise stated
14
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued o. Provision for Employee Benefits continued
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 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.
As of September 30, 2006 and 2005, the rates of exchange used are as follows:
2006 2005
Euro EUR1 11,731.70
12,419.44 U.S. dollar US1
9,235.00 10,310.00
Japanese yen JP¥100 7,841.23
9,124.30 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.
PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended September 30, 2006 and 2005 Expressed in rupiah, unless otherwise stated
15
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued r. Corporate Income Tax
