PT SUMMARECON AGUNG Tbk AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2013 AND DECEMBER 31, 2012, 2011 AND 2010 AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2013 AND 2012 UNAUDITED
AND YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 Expressed in thousands of rupiah, unless otherwise stated
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3. MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS continued Judgments continued
• Business combinations continued
When the acquisition of a subsidiary does not represent a business acquisition, it is accounted for as an acquisition of a group of assets and liabilities. The cost of the acquisition is allocated to the
assets and liabilities acquired based upon their relative fair values, and no goodwill or deferred tax is recognized.
• Classification of property
The Company and Subsidiaries determine whether an acquired property is classified as investment property or property inventory:
- Investment property consists of land and buildings principally offices, commercial warehouse
and retail property which are not occupied substantially for use by, or in the operations of, the Company and Subsidiaries, nor for sale in the ordinary course of business, but are held
primarily to earn rental income and capital appreciation.
- Property inventory consists of property that is held for sale in the ordinary course of business.
Principally, this is residential property that the Company and Subsidiaries develop and intend to sell before or on completion of construction.
• Operating lease contracts - the Company or Subsidiaries as lessor
The Company and Subsidiaries have entered into commercial property leases on their investment property portfolio. The Company and Subsidiaries have determined, based on an evaluation of the
terms and conditions of the arrangements, that they retain all the significant risks and rewards of ownership of the leased property and, therefore, they account for the leases as operating leases.
Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the end
of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
• Determination of fair value of financial assets and financial liabilities
When the fair value of financial assets and financial liabilities recorded in the consolidated statements of financial position cannot be derived from active markets, their fair value is
determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a
degree of judgment is required in establishing fair value.
The judgment includes consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial
instruments.
