PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013 Figures are Presented in Millions of Rupiah,unless Otherwise Stated
g. Income Tax
Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain due
to different interpretation of tax regulations. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will have an impact
on the current and deferred income tax assets and liabilities in the period in which such determination is made.
Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at
the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are disclosed below. The Group
based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments
may change due to market changes on circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur:
a. Fair Value of Financial Assets and Financial Liabilities
Indonesian Financial Accounting Standards require measurement of certain financial assets and liabilities at fair values, and the disclosure requires the use of estimates. Significant
component of fair value measurement is determined based on verifiable objective evidence i.e. foreign exchange rate, interest rate, while timing and amount of changes in fair value
might differ due to different valuation method used. The fair value of financial assets and liabilities are set out in Note 52.
b. Estimated Useful Lives of Investment Properties and Property and Equipment
The useful life of each of the item of the Group’s investment properties and property and equipment are estimated based on the period over which the asset is expected to be
available for use. Such estimation is based on a collective assessment of similar business, internal technical evaluation and experience with similar assets. The estimated useful life of
each asset is reviewed periodically and updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence, and legal
or other limits on the use of the asset. It is possible, however, that future results of operations could be materially affected by changes in the amounts and timing of recorded
expenses brought about by changes in the factors mentioned above. A reduction in the estimated useful life of any item of investment properties and property and equipment would
increase the recorded depreciation and decrease the carrying values of these assets. There is no change in the estimated useful lives of investment properties and property and
equipment during the year. The carrying value of these assets are further explained in Notes 18 and 19.
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PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013 Figures are Presented in Millions of Rupiah,unless Otherwise Stated
c. Assessment of Insurance Contract Liability Life Insurance and Loss Insurance
Liability for Future Policy Benefits Liability for future policy benefits represents the present value of estimated future policy
benefits to be paid to policyholders or their heirs less present value of estimated future premiums to be received from the policyholders, recognized in correlation with the
recognition of premium income. Liabiility for future policy benefits is stated in the consolidated statement of financial position in accordance with the actuarial calculation.
Increase or decrease in liability for future policy benefits is recognized in the current year consolidated statement of comprehensive income.
The liability for life insurance contracts is calculated either based on current assumptions or on assumptions established at inception of the contract, reflecting the best estimate at the
time increased with a margin for risk and adverse devition. Valuation of liabilities to policyholders reflects management’s best current estimate of future cash flows.
The main assumptions used related to mortality, morbidity, expenses, lapse and surrender rates and discount rates. The Group bases mortality and morbidity on standard Indonesian
industry mortality tables which reflect historical experiences, adjusted when appropriate to reflect the Group’s unique risk exposure, product characteristics, target markets and own
claims severity and frequency experiences. Estimates are also made as to future investment income arising from the asset-backed life
insurance contracts. These estimates are based on current market returns as well as expectations about future economic and financial developments.
Assumptions on future expense are based on current expense levels, adjusted for expected expense inflation if appropriate.
Discount rate is based on current industry risk rates, adjusted for the Group’s own risk exposure.
Estimated Claim Liabilities
Estimated claims liability represents amounts set aside to provide for the outstanding and incurred claims arising from insurance policies in force during the accounting period.
Management’s judgment is required to determine the amount of estimated claims liability based on guidelines from Minister of Finance of Republic of Indonesia.
The carrying value of liability for future policy benefit and estimated claim liability are disclosed in Notes 25 and 26.
d. Long-term Employee Benefits
The determination of the obligation and long-term employee benefits is dependent on the selection of certain assumptions used by actuary in calculating such amounts. Those
assumptions are described in Note 47 and include, among others, discount rate and rate of salary increase. Actual results that differ from the Group’s assumptions are accumulated
and amortized over future periods and therefore, generally affect the recognized expense and recorded obligation in such future periods. While it is believed that the Group’s
assumptions are reasonable and appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the amount of long-term employee
benefits liability.
The carrying value of long-term employee benefits is disclosed in Note 47.
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