PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of June 30, 2014 and for the Six Months Period Then Ended unaudited
Figures in tables are expressedin billions of rupiah, unless otherwise stated
51
11. PROPERTY AND EQUIPMENT continued
a. Gain on disposal or sale of property and equipment
2014 2013
Proceeds from sale of property and equipment 1
55 Net book value
12 Exchange of property and equipment – net
Gain on disposal or sale of property and equipment
1 43
b. Assets impairment i
As of December 31, 2013, the CGUs that independently generate cash inflows were fixed wireline, fixed wireless, cellular and others. As of December 31, 2013, there were indications
of impairment in the fixed wireless CGU presented as part of personal segment, which were mainly due to increased competition in the fixed wireless market that resulted in lower
average tariffs, declining active customers and declining Average Revenue Per User “ARPU”. The Company assessed the recoverable value of the assets in the CGU and
determined that assets for the fixed wireless CGU were impaired by Rp596 billion as at December 31, 2013, and additional impairment by Rp190 billion as add June 30, 2014 which
is recognized in the consolidated statement of comprehensive income under “Depreciation and amortization”. The recoverable amount has been determined based on value-in-use
VIU calculations. These calculations used pre-tax cash flow projections approved by management covering a five-year period and with cash flows beyond the five-year
period extrapolated using a perpetuity growth rate. The cash flow projections reflect management’s expectations of revenue, Earnings Before Interest, Tax, Depreciation and
Amortization “EBITDA” growth and operating cash flows on the basis that the fixed wireless CGU generates positive net cash flows starting from 2014. Management’s cash flow
projection also incorporates management’s reasonable expectations for developments in macro economic conditions and market expectations for the Indonesian telecommunications
industry. As of December 31, 2013, management applied a pre-tax discount rate of 13.5 derived from the Company’s post-tax weighted average cost of capital and benchmarked to
externally available data. As of December 31, 2013, the perpetuity growth rate used of 0, assumes that subscriber numbers and average revenue per user may continue to decrease
after five years.
If the performance of the fixed wireless CGU continues to decline or if management’s initiatives are not performing as expected in the next financial year, analysis will be required
to assess whether there will be further impairment next year.
ii Management believes that there is no indication of impairment in the value of other CGUs as of December 31, 2013.
c. Others i
Interest capitalized to property under construction amounted Rp34 billion and Rp100 billion for six months period ended June 30, 2014 and for the year ended
December 31, 2013, respectively. The capitalization rate used to determine the amount of borrowing costs eligible for capitalization ranges from 9.75 to 13.07 and from
9.75 to 13.07 for six months period ended June 30, 2014 and for the year ended December 31, 2013, respectively.
ii No foreign exchange loss was capitalized as part of property under construction for six months period ended June 30, 2014 and for the year ended December 31, 2013.
11. PROPERTY AND EQUIPMENT continued
PERUSAHAAN PERSEROAN PERSERO PT TELEKOMUNIKASI INDONESIA Tbk AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of June 30, 2014 and for the Six Months Period Then Ended unaudited
Figures in tables are expressedin billions of rupiah, unless otherwise stated
52 c. Others continued
iii In 2012, Telkomsel decided to replace certain equipment units with net carrying amount of Rp1,037 billion, as part of a modernization program. Accordingly, Telkomsel changed the
estimated useful lives of such equipment. In 2014, the effect of additional depreciation expense amounted to Rp54 billion.
The impact of the change in the estimated useful lives of the equipment for the year ended June 30, 2014 is to decrease the profit before income tax by Rp54 billion.
iv In 2012, the useful lives of Telkomsel’s towers were changed from 10 years to 20 years to reflect their current economic lives. The impact is a reduction of depreciation expense for the
six months period ended June 30, 2014 is Rp290 billion. The impact of the change in the estimated useful lives of the towers in future periods is to
increase the profit before income tax as follows:
Years Amount
2014 6 months 275
2015 469
2016 301
2017 92
v Exchange of property and equipment •
In 2011, the Company and PT Industri Telekomunikasi Indonesia “INTI” signed Purchase Orders of Procurement and Installation Agreement for the Modernization of the
Copper Cable Network through Optimization of Asset Copper Cable Network with Trade InTrade Off with total procurement value amounting to Rp1,499 billion up to December
31, 2013.
In 2013, the Company derecognized the copper cable network asset with net carrying value of Rp1.6 billion, respectively, and recorded the fiber optic network asset from the
exchange transaction of Rp203 billion.
•
In 2014 and 2013, certain equipment units of Telkomsel with net carrying amount of Rp32 million and Rp173 million were exchanged with equipment from NSN Oy and PT Huawei.
As of June 30, 2014, Telkomsel’s equipment with net carrying amount of Rp31 billion and Rp131 billion are going to be exchanged with equipment from NSN Oy
and PT Huawei; therefore,Telkomsel’s equipment units were reclassified as assets held for sale Note 9.
