174
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IABlE, STrong, EFFICIEnT
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 514
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2013 AND 2012
Expressed in thousands of
Å
S Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
i. Derivative financial instruments and hedging activities continued
The Group documents at the inception of the transaction the relationship between hedging instruments and hedging items, as well as its risk management objectives and strategy for undertaking hedge transactions. The
Group also documents its assessment, both at the hedge inception and on an ongoing basis, of whether the derivatives used in hedging transactions are highly effective in offsetting changes in the fair value or cash flow from
hedged items.
The full value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the
hedged item is less than 12 months.
i fair value hedge
Changes in the fair values of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to
the hedged risk. The gain or loss relating to the effective portion of such fair value hedge is recognised in profit or loss in the same line of changes as the fair value of the hedge items to which it is charged. The gain or loss
relating to the ineffective portion is recognised immediately in profit or loss.
ii cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Amounts accumulated in other comprehensive income within equity are reclassified to profit or loss in the period when the hedged item affects profit or loss. The gain or loss relating to the effective portion of the cash
flow hedge is recognised in profit or loss in the same line as the hedged items to which it is usually charged. However, when the forecast transaction that is being hedged against results in the recognition of a non-
financial asset for example, inventory or fixed assets, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset. The deferred amounts
are ultimately recognised in cost of revenue in the case of inventory or in depreciation in the case of fixed assets.
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 forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to profit
or loss.
Changes in the fair value of any derivative instruments that are not designated or do not qualify for hedge accounting are recognised immediately in profit or loss.
j. Fixed assets and depreciation
Land rights are recognised at cost and not depreciated, unless the land meets any of the following criteria: -
Management is of the opinion that the quality of the land’s condition after a certain year is no longer sufficient for it to be utilised for the Group’s main operations.
- The main characteristic of the operation is to leave the land after completion of the projectactivity.
- The government’s policy is to use the land for public interest so that an extension of renewal of rights cannot
be obtained.
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DAro EnErgy 2013 AnnuAl rEporT
175
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 515
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2013 AND 2012
Expressed in thousands of
È
S Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
j. Fixed assets and depreciation continued
In such cases, land rights are depreciated using the straight-line method over the expected useful life of land rights as follows:
- the year of land utilisation that is expected to be achieved; or
- the year of expected productivity of the land; or
- the year of rights, if the rights cannot be renewed or extended and the rights are shorter than the year of land
utilisation or the year of expected productivity of land. Initial legal costs incurred to obtain legal rights are recognised as part of the acquisition cost of the land and costs
related to renewal of land rights are recognised as intangible assets and amortised over the contractual life of the land rights.
Fixed assets are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. Fixed assets, except for the fixed assets of Adaro, are depreciated using the
straight-line method to their residual values over their expected useful lives as follows:
Years Power plant
25 Buildings
20 Infrastructure
5 – 30 Operational equipment
6 – 10 Vessels
5 – 20 Project equipment
4 Mining equipment
4 Vehicles
4 – 8 Office equipment
4 – 5 The fixed assets of Adaro are depreciated using the straight-line method over the lesser of the estimated useful
lives of the assets, the life of the mine or the term of the CCA, stated as follows: Years
Buildings 9 – 20
Machinery, operational equipment and vehicles 3 – 10
Office equipment 10
Crushing and handling facilities 9 – 30
Roads and bridges 9 – 30
Stockpile facilities 17 – 20
Dock facilities 9 – 20
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amounts of replaced parts are derecognised. All other repairs and maintenance are charged to profit or loss during the financial year in which they are incurred.
Assets’ useful lives, residual values and depreciation methods are reviewed and adjusted if appropriate, at least at the end of each financial year. The effects of any revisions are recognised in profit or loss, when the changes arise.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
176
ÉÊË
IABlE, STrong, EFFICIEnT
PT ADARO ENERGY Tbk AND SUBSIDIARIES Schedule 516
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2013 AND 2012
Expressed in thousands of
Ì
S Dollars, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
j. Fixed assets and depreciation continued
