NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued JUNE 30, 2012 UNAUDITED AND DECEMBER 31, 2011 AUDITED
AND SIX MONTHS PERIOD ENDED JUNE 30, 2012 AND 2011 UNAUDITED Figures in tables are presented in billions of Rupiah, unless otherwise stated
30
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued 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. For interim dividends, the Company recognized them as liability based on the Board of Director’s decision with the approval from the Board of Commissioners.
x. 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 ordinary shares.
y. Segment information The Company and its 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 its 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. Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The Company and its subsidiaries make estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are addressed below.
i. Retirement benefits
The present value of the retirement benefits obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used
in determining the net cost income for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of retirement benefits obligations.
The Company and its subsidiaries determine the appropriate discount rate at the end of each reporting period. This is the interest rate that should be used to determine the present value
of estimated future cash outflows expected to be required to settle the obligations. In determining the appropriate discount rate, the Company and its subsidiaries consider the
interest rates of government bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement
benefit obligation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued JUNE 30, 2012 UNAUDITED AND DECEMBER 31, 2011 AUDITED
AND SIX MONTHS PERIOD ENDED JUNE 30, 2012 AND 2011 UNAUDITED Figures in tables are presented in billions of Rupiah, unless otherwise stated
31
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued z. Critical Accounting Estimates and Judgements continued
i. Retirement benefits
continued
If there is an improvement in the ratings of such government bonds or a decrease in interest rates as a result of improving economic conditions, there could be a material impact on the
discount rate used in determining the post-employment benefit obligations. Other key assumptions for retirement benefit obligations are based in part on current market
conditions. Additional information is disclosed in Notes 33, 34 and 35.
ii Provision for impairment of receivables
The Company and its subsidiaries assess whether there is objective evidence that trade receivables have been impaired at the end of each reporting period. Provision for impairment
of receivables is calculated based on a review of the current status of existing receivables and historical collections experience. Such provisions are adjusted periodically to reflect the
actual and anticipated experience.
iii. Income taxes
Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The
Company and its subsidiaries recognize liabilities for anticipated tax audit issues based on estimates whether additional taxes will be due. Where the final tax outcome of these matters
is different from the amounts that were initially recorded, such differences will impact the current and deferred tax income tax assets and liabilities in the period in which such
determination is made.
iv. Impairment of non-financial assets
The Company and its subsidiaries tests annually whether goodwill is impaired. Other non- financial assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset or a cash generating unit is determined based on the higher
of its fair value less costs to sell and its value in use, calculated on the basis of management’s assumptions and estimates.
In determining value in use, the Company and its subsidiaries apply management judgement in establishing forecasts of future operating performance, as well as the selection of growth
rates and discount rates. These judgements are applied based on our understanding of historical information and expectations of future performance. Changing the key assumptions,
including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect the value in use calculations.
For the year ended December 31, 2011, the Company recognized Rp.563 billion, of impairment loss on property, plant and equipment in relation to the fixed wireless services. A
1 increase in the discount rate used would result in an increase in impairment loss of approximately Rp.907 billion. However the recoverable amount of the fixed wireless CGU is
most sensitive to whether management will be able to implement its plans, including the full mobility initiative, such that it generates positive cash flows and returns to profitablility as
projected. If the performance of the fixed wireless CGU continues to decline or if management’s initiatives are not performing as expected in the next financial year, analysis
will be required to assess whether there will be further impairment next year Note 10c.
