Acquisitions of subsidiaries SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued c. Transactions with related parties

PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued DECEMBER 31, 2010 AUDITED AND SEPTEMBER 30, 2011 UNAUDITED AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2010 AND 2011 UNAUDITED Figures in tables are presented in millions of Rupiah, unless otherwise stated 26

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued f. Investments continued

iii. Investments in associated companies Investments in companies where the Company has 20 to 50 of the voting rights, and through which the Company exerts significant influence, but not control, over the financial and operating policies are accounted for using the equity method. Under this method, the Company recognizes the Companys proportionate share in the income or loss of the associated company from the date that significant influence commences until the date that significant influence ceases. When the Company’s share of loss exceeds the carrying amount of the associated company, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. Investment in joint ventures is accounted by using the equity method whereby the participation in a joint venture initially recorded at cost and subsequently adjusted for changes in the shares of the venturer of the joint venture’s net assets that occurred after the acquisition. On a continuous basis, but no less frequently than at the end of each year, the Company and its subsidiaries evaluate the carrying amount of their ownership interests in associated companies for possible impairment according to PSAK 55 Revised 2006, “Financial Instruments: Recognition and Measurement”. Factors considered in assessing whether an indication of other-than-temporary impairment exists include the achievement of business plan objectives and milestones including cash flow projections and the results of planned financing activities, the financial condition and prospects of each associated company, the fair value of the ownership interest relative to the carrying amount of the investment, the period of time the fair value of the ownership interest has been below the carrying amount of the investment and other relevant factors. Impairment to be recognized is measured based on the amount by which the carrying amount of the investment exceeds the fair value of the investment. Fair value is determined based on quoted market prices if any and projected discounted cash flows, whichever is lower or other valuation techniques as appropriate according to PSAK 48 Revised 2009, “Impairment of Assets”. Changes in the value of investments due to changes in the equity of associated companies arising from capital transactions of such associated companies with other parties are recognized directly in equity and are reported as “Difference due to change of equity in associated companies” in the stockholders’ equity section. Differences previously credited directly to equity as a result of equity transactions in associated companies are released to the consolidated statements comprehensive of income upon the sale of an interest in the associate in proportion to percentage of the interests sold. The functional currency of PT Pasifik Satelit Nusantara “PSN” and PT Citra Sari Makmur “CSM” is the United States Dollars “U.S. Dollars” and the functional currency of Scicom MSC Berhad “Scicom” is Malaysian Ringgit “MYR”. For the purpose of reporting these investments using the equity method, the assets and liabilities of these companies as of the statement of financial position date are translated into Indonesian Rupiah using the rates of exchange prevailing at that date, while revenues and expenses are translated into Indonesian Rupiah at the average rates of exchange for the year. The resulting translation adjustments are reported as part of “Translation adjustment” in the stockholders’ equity section. PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued DECEMBER 31, 2010 AUDITED AND SEPTEMBER 30, 2011 UNAUDITED AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2010 AND 2011 UNAUDITED Figures in tables are presented in millions of Rupiah, unless otherwise stated 27

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued g. Trade and other receivables

Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost, less allowance for doubtful accounts. This allowance for doubtful accounts is made based on management’s evaluation of the collectability of outstanding amounts. Accounts are written off in the period during which they are determined to be uncollectible.

h. Inventories

Inventories consist of components and modules, which are subsequently expensed or transferred to property, plant and equipment upon use. 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. Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average method for components, SIM cards, RUIM cards 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 inventories expense in the period in which the reversal occurs. Allowance 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. Intangible assets

Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 19 Revised 2010, “Intangible Assets” and Financial Accounting Standards Interpretation Interpretasi Standar Akuntansi Keuangan or “ISAK” 14 “Intangible Assets - Website Costs”, which became effective for financial statement periods beginning on or after January 1, 2011 and is applied prospectively. Intangible assets comprised of intangible assets from subsidiaries or business acquisitions, licenses 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.