Financial instruments SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 UNAUDITED AND FOR SIX MONTHS PERIOD ENDED WITH COMPARATIVE FIGURES AS OF DECEMBER 31, 2012 AUDITED AND FOR SIX MONTHS PERIOD ENDED JUNE 30, 2012 UNAUDITED Figures in tables are presented in billions of Rupiah, unless otherwise stated 34

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

u. Financial instruments continued

vi. Derecognition of financial instrument The Company and subsidiaries derecognize a financial asset when the contractual rights to the cash flows from the financial asset expire, or when the Company and subsidiaries transfer substantially all the risks and rewards of ownership of the financial asset. The Company and subsidiaries derecognize a financial liability when the obligation specified in the contract is discharged or cancelled or expired.

v. Treasury stock

Reacquired Company s stock is accounted for at its reacquisition cost and classified as Treasury Stock and presented as a deduction to equity. The cost of treasury stock soldtransferred is accounted for using the weighted average method. Portion of treasury stock transferred for employees ownership program is accounted for at its fair value. The difference between the cost and the proceeds from the saletransfer value of treasury stock is credited to Additional Paid-in Capital .

w. Dividends

Dividend distribution to the Company s stockholders is recognized as liability in the Company s consolidated financial statements in the period in which the dividends are approved by the Company s stockholders. The Company recognizes interim devidends as liability based on the Board of Directors decision with the approval from the Board of Commissioners.

x. Basic earnings per share and earnings per ADS

Basic earnings per share are computed by dividing income for the period attributable to owners of the parent by the weighted average number of shares outstanding during the period. Income per ADS is computed by multiplying basic earnings per share by 40, the number of shares represented by each ADS. The Company does not have potentially dilutive financial investments.

y. Segment information

The Company and subsidiaries segment information is presented based upon identified operating segments. An operating segment is a component of an entity: a that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses relating to transactions with other components of the same entity; b whose operating results are regularly reviewed by the Company and subsidiaries chief operating decision maker CODM ie., Directors, to make decisions about resources to be allocated to the segment and assess its performance, and c for which discrete financial information is available.

z. Provisions

Provisions are recognized when the Company and subsidiaries have a present obligation legal or constructive as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the obligation. PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 UNAUDITED AND FOR SIX MONTHS PERIOD ENDED WITH COMPARATIVE FIGURES AS OF DECEMBER 31, 2012 AUDITED AND FOR SIX MONTHS PERIOD ENDED JUNE 30, 2012 UNAUDITED Figures in tables are presented in billions of Rupiah, unless otherwise stated 35

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued