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
19
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
h. Inventories Inventories consist of components and modules, which are subsequently expensed or transferred
to property, plant and equipment upon use. Components and modules represent telephone terminals, cables, transmission installation spare parts and other spare parts. Inventories also
include Subscriber Identification Module “SIM” cards, Removable User Identity Module “RUIM” cards, handsets, set top box, wireless broadband modem and prepaid voucher blanks, which are
expensed upon sale. The costs of inventories comprise of the purchase price, import duties, other taxes, transport, handling and other costs directly attributable to the it’s acquisition. Inventories
are stated at the lower of cost and net realizable value. Net realizable value is the estimate of selling price less the costs to sell.
Cost is determined using the weighted average method for components, SIM cards, RUIM cards, handsets, set top box, wireless broadband modem and prepaid voucher blanks, and the specific-
identification method for modules. The amount of any write-down of inventories below cost to net realizable value and all losses of
inventories shall be recognized as an expense in the period in which the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in
net realizable value, shall be recognized as a reduction in the amount of general and administrative expense in the period in which the reversal occurs.
Provision 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. Assets held for sale
Assets or disposals groups are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction rather than through continuing use and a
sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.
Assets that meet the criteria to be classified as held for sale are reclassified from property, plant and equipment and depreciation on such assets is ceased.
k. Intangible assets
Intangible assets comprised of intangible assets from subsidiaries or business acquisitions, licenses 3G and Broadband Wireless Access and computer software. 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
estimate the recoverable value of their intangible assets. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written-down to its estimated recoverable
amount.
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
20
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued k. Intangible assets continued
Intangible assets are depreciated using the straight-line method, based on the estimated useful lives of the assets as follows:
Years Licenses
10 Other intangible assets
2-10 l.
Property, plant and equipment - direct acquisitions Property, plant and equipment directly acquired are stated at cost, less accumulated depreciation
and impairment losses.
The cost of the assets include: a purchase price, b any costs directly attributable to bringing the asset to its location and condition and c the initial estimate of the costs of dismantling and
removing the item and restoring the site on which it is located. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be
depreciated separately.
Property, plant and equipment, except land, are depreciated using the straight-line method, based on the estimated useful lives of the assets as follows:
Years Buildings
20-40 Leasehold improvements
3-7 Switching equipment
5-15 Telegraph, telex and data communication equipment
5-15 Transmission installation and equipment
5-25 Satellite, earth station and equipment
3-20 Cable network
5-25 Power supply
3-10 Data processing equipment
3-10 Other telecommunications peripherals
5 Office equipment
2-5 Vehicles
Customer Premise Equipment “CPE” 5-8
10 Other equipment
5 Depreciation or amortization method, useful lives and residual value of an asset should be
reviewed at least at each financial year-end and adjusted if appropriate.
