PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED continued SEPTEMBER 30, 2007 AND 2008,
AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008 Figures in tables are presented in millions of Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued f. Investments continued
iii. Investments in associated companies continued On a continuous basis, but no less frequently than at the end of each year, the Company and
its subsidiaries evaluate the carrying amount of their ownership interests in associated companies for possible impairment. Factors considered in assessing whether an indication of
other-than-temporary impairment exists include the achievement of business plan objectives and milestones including cash flow projections and the results of planned financing activities,
the financial condition and prospects of each associated company, the fair value of the ownership interest relative to the carrying amount of the investment, the period of time the fair
value of the ownership interest has been below the carrying amount of the investment and other relevant factors. Impairment to be recognized is measured based on the amount by
which the carrying amount of the investment exceeds the fair value of the investment. Fair value is determined based on quoted market prices if any and projected discounted cash
flows, whichever is lower or other valuation techniques as appropriate.
Changes in the value of investments due to changes in the equity of associated companies arising from capital transactions of such associated companies with other parties are
recognized directly in equity and are reported as “Difference due to change of equity in associated companies” in the stockholders’ equity section. Differences previously credited
directly to equity as a result of equity transactions in associated companies are released to the consolidated statements of income upon the sale of an interest in the associate in
proportion to percentage of the interests sold.
The functional currency of PT Pasifik Satelit Nusantara “PSN” and PT Citra Sari Makmur “CSM” is the United States Dollars “U.S. Dollars”. For the purpose of reporting these
investments using the equity method, the assets and liabilities of these companies as of the balance sheet date are translated into Indonesian Rupiah using the rates of exchange
prevailing at that date, while revenues and expenses are translated into Indonesian Rupiah at the average rates of exchange for the year. The resulting translation adjustments are
reported as part of “Translation adjustment” in the stockholders’ equity section.
iv. Other investments Investments in companies where ownership interests of less than 20 that do not have
readily determinable fair values and are held for long-term are carried at cost and are adjusted only for other-than-temporary decline in the value of individual investments. Any
write-down is charged directly to income of the current year.
g. Trade and other accounts receivable Trade and other accounts receivable are recorded net of allowance for doubtful accounts, based
upon a review of the collectibility of the outstanding amounts. Accounts are written-off against the allowance during the period in which they are determined to be not collectible.
PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED continued SEPTEMBER 30, 2007 AND 2008,
AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2007 AND 2008 Figures in tables are presented in millions of Rupiah, unless otherwise stated
21
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued g. Trade and other accounts receivable continued
The allowance for doubtful accounts is the Company and its subsidiaries’ best estimate of the probable credit losses in the accounts receivable. The amount of the allowance is recognized in
the consolidated statement of income within operating expenses - general and administrative. The Company and its subsidiaries determine the allowance based on historical write-off
experience. The Company and its subsidiaries review the allowance for doubtful accounts every month. Past due balances over 90 days for retail customers are fully provided, and past due
balance for non-retail customers over a specified amount are reviewed individually for collectibility. Account balances are written off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote.
h. Inventories
Inventories consist of components and modules which are expensed or transferred to property, plant and equipment upon use. Inventories also include Subscriber Identification Module “SIM”
cards, Removable User Identity Module “RUIM” cards and prepaid voucher blanks, which are expensed upon sale. Inventories are stated at the lower of costs or net realizable value.
Cost is determined using the weighted average method for components, SIM card, RUIM card and prepaid voucher blanks, and the specific-identification method for modules.
Allowance for obsolescence is primarily based on the estimated forecast of future usage of these items.
i. Prepaid expenses
Prepaid expenses are amortized over their future beneficial periods using the straight-line method.
j. Intangible assets Intangible assets comprised of intangible assets from subsidiaries and business acquisition and
licenses. Intangible assets shall be recognized if it is probable that the expected future economic benefits that are attributable to each asset will flow to the Company and its subsidiaries and the
cost of the asset can be reliably measured. Intangible assets are stated at cost less accumulated amortization and impairment, if any.
Intangible assets are amortized over their useful lives. The Company and its subsidiaries shall estimate the recoverable value of their intangible asset. When the carrying amount of an asset
exceeds its estimated recoverable amount, the asset is written down to its estimated recoverable amount.
In 2006, Telkomsel was granted the right to operate the 3G license. Telkomsel is required to pay an up-front fee and annual rights of usage “Biaya Hak Penggunaan” or “BHP” fee for the next
ten years. The up-front fee is recorded as intangible asset and amortized using the straight-line method over the term of the right to operate the 3G license 10 years. Amortization commenced
in 2006 when the assets attributable to the provision of the related services became available for use.
