PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2012 and 2011 and January 1, 2011December 31, 2010 and For the Years then Ended December 31, 2012 and 2011
Figures are Presented in Millions of Rupiah, unless Otherwise Stated
- 27 - All transactions with related parties, whether or not done under similar terms and conditions
as those done with third parties, are disclosed in the consolidated financial statements.
g. Cash and Cash Equivalents
Cash and cash equivalents consists of cash on hand, cash in banks, demand deposits with Bank Indonesia, time depsoits with original maturities of three 3 months or less from the
date of placements, funds placed in securities companies and which are not used as collateral and are not restricted.
h. Minimum Liquidity Reserve
On October 23, 2008, Bank Indonesia BI issued a regulation No. 1025PBI2008 regarding the amendement of Bank Indonesia Regulation No. 10192008 dated October 14,
2008, regarding Statutory Reserves at Bank Indonesia for Commercial Banks. The said regulation was amended with Bank Indonesia Regulation No.1219PBI2010 dated October
4, 2010 regarding of Statutory Reserves at Bank Indonesia for Commercial Banks in Rupiah and Foreign Currency which is effective on November 1, 2010, except for Loan to Deposits
LDR Reserve which is effective on March 1, 2011
On February 9, 2011, BI issued Regulation PBI No. 1310PBI2011 No. 12192010 regarding the amendment of Bank Indonesia Regulation Statutory Reserves at Bank
Indonesia for Commercial Banks in Rupiah and Foreign Currency Based on the Bank Indonesia Regulation, the statutory reserve consists of Rupiah and Foreign Currency
Reserve. Statutory Reserve in Rupiah consist of Primary Reserve, Secondary Reserve, and Loan to Deposit Ratio LDR Reserve.
Primary Statutory Reserve is a minimum deposit that should be maintained by the bank in current account with BI based on a certain percentage of Third Party Fund TPF as
determined by BI.
Secondary Statutory Reserve is a minimum deposit that should be maintained by the bank in the form of Bank Indonesia Certificates SBI, Government Debenture Debt
SUN andor Excess Reserve, based on certain percentage of TPF in accordance with the regulation.
LDR Reserve is a minimum deposit required to be maintained by the banks in the form of current account with BI for the percentage of TPF which is calculated based on the
difference of LDR held by banks and Target LDR which must be complied with by banks.
i. Financial Instruments
Effective January 1, 2012, the Group has applied PSAK No. 50 Revised 2010, “Financial Instruments: Presentation”, PSAK No. 55 Revised 2011, “Financial Instruments:
Recognition and Measurement”, and PSAK No. 60, “Financial Instruments: Disclosures”.
The Group recognizes a financial asset or a financial liability in the consolidated statement of financial position if, and only if, they become a party to the contractual provisions of the
instrument. All regular way purchases and sales of financial instruments are recognized on the transaction date.
Financial instruments are recognized initially at fair value, which is the fair value of the consideration given in case of an asset or received in case of a liability. The fair value of
the consideration given or received is determined by reference to the transaction price or other market prices. If such market prices are not reliably determinable, the fair value of the
consideration is estimated as the sum of all future cash payments or receipts, discounted using the prevailing market rates of interest for similar instruments with similar maturities.
The initial measurement of financial instruments, except for financial instruments at fair value through profit and loss FVPL, includes transaction costs.
PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2012 and 2011 and January 1, 2011December 31, 2010 and For the Years then Ended December 31, 2012 and 2011
Figures are Presented in Millions of Rupiah, unless Otherwise Stated
- 28 - Transaction costs include only those costs that are directly attributable to the acquisition of a
financial asset or issue of financial liability and they are incremental costs that would not have been incurred if the instrument had not been acquired or issued. Such transaction
costs are amortized over the terms of the instruments based on the effective interest rate method.
Effective interest rate method is a method of calculating the amortized cost of a financial asset or a financial liability and allocating the interest income or expense over the relevant
period by using an interest rate that exactly discounts estimated future cash payments or receipts through the expected life of the instruments or, when appropriate, a shorter period
to the net carrying amount of the financial instruments. When calculating the effective interest, the Group estimates future cash flows considering all contractual terms of the
financial instruments excluding future credit losses and includes all fees and points paid or received that are an integral part of the effective interest rate.
Amortized cost is the amount at which the financial asset or financial liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortization
using the effective interest rate method of any difference between the initial amount recognized and the maturity amount, minus any reduction for impairment.
The classification of the financial instruments depends on the purpose for which the instruments were acquired and whether they are quoted in an active market. At initial
recognition, the Group classifies its financial instruments in following categories: financial assets at FVPL, loans and receivables, held-to-maturity HTM investments, available for
sale AFS financial assets, financial liabilities at FVPL, and other financial liabilities; and, where allowed and appropriate, re-evaluates such classification at every reporting date.
Determination of Fair Value
The fair value of financial instruments traded in active markets at the statements of financial position date is based on their quoted market price or dealer price quotations bid price for
long positions and ask price for short positions, without any deduction for transaction costs. When current bid and asking prices are not available, the price of the most recent
transaction is used since it provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction.
For all other financial instruments not listed in an active market, except investment in unquoted equity securities, the fair value is determined by using appropriate valuation
techniques. Valuation techniques include net present value techniques, comparison to similar instruments for which market observable prices exist, options pricing models, and
other relevant valuation models. In the absence of a reliable basis for determining fair value, investments in unquoted equity securities are carried at cost net of impairment.
The Group classifies the measurement of fair value by using fair value hierarchy which reflects significance of inputs used to measure the fair value. The fair value hierarchy is as
follows:
1. Quoted prices in active market for identical assets or liabilities Level 1;
2. Inputs other than quoted prices which include in Level 1, and are either directly or indirectly observable for assets or liabilities Level 2;
3. Inputs for assets and liabilities which are not derived from observable data Level 3.
