Adaro Energy Annual Report 2008 www.adaro.com
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Contact Us Governing Adaro
Financial Report Corporate Social Responsibility
PT ADARO ENERGY Tbk Schedule 55
FORMERLY PT PADANG KARUNIA AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2008 AND 2007 Expressed in million Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Group’s consolidated financial statements were prepared and finalised by the Board of Directors on 16 March 2009. Presented below are the significant accounting policies adopted in preparing the consolidated financial statements of the Group,
which are in conformity with accounting principles generally accepted in Indonesia. The consolidated financial statements are also prepared in conformity with the Regulations of the Capital Market and Financial Institution Supervisory Board Bapepam LK No.
VIII.G.7 for Guidance on Financial Statement Presentation and Circular Letter of Bapepam LK No. SE -02BL2008 dated 31 January 2008 for Guidance on the Preparation and Disclosure of Financial Statements of an Issuer or Public Company in the
General Mining Industry.
a. Basis of preparation of the consolidated financial statements
The consolidated financial statements have been prepared on the basis of historical cost, except for financial instruments, which are carried at fair value.
The consolidated statement of cash flows have been prepared based on the direct method by classifying the cash flows on the basis of operating, investing and financing activities. For the purpose of the consolidated statement of cash flows, cash and
cash equivalents includes cash on hand, cash in banks and short-term investments with a maturity of three months or less, net of overdrafts.
Figures in the consolidated financial statements are expressed in million Rupiah, unless otherwise stated.
b. Principles of consolidation
The consolidated financial statements include the accounts of the Company and subsidiaries in which the Company dir ectly or indirectly has ownership of more than 50 of voting rights, or if equal to or less than 50, the Company has the ability to
control the subsidiaries. The subsidiaries are consolidated from the date on which effective control is transferred to the Company and are no longer consolidated from the date of disposal.
The effect of all transactions and balances between companies in the Group has been eliminated in preparing the consolidated financial statements.
The accounting policies adopted in prepar ing the consolidated financial statements have been consistently applied by the subsidiaries unless otherwise stated.
The accounts of the foreign operations that are integral to the Company are translated as if the foreign operations’ transactions were the Company’s own transactions.
Exchange differences arising from a monetary item that, in substance, forms part of the Groups net investment in a foreign entity is classified as equity in the Group’s consolidated financial statements until the disposal of the net investment, at which
time an exchange difference is recognised as income or expense. The exchange rates of United States Dollars “US Dollars” to Rupiah Rupiah full amount used in respect of the consolidation
process of domestic and foreign subsidiaries which are not integral to the Company’s operations for 31 December 2008 and 2007 were as follows:
Exchange rates at Average
the balance sheet date exchange rates
2008 2007
2008 2007
US Dollars 1Rupiah 10,950
9,419 9,680
9,136 The proportionate share of minority shareholders in the net assets of subsidiaries is presented as “minority interest” in the
consolidated balance sheet. Minority interest is not recognised in respect of subsidiaries with a deficit in equity, unless the minority shareholders have a
contractual obligation to fund the deficit. The proportionate share of minority shareholders in net incomeloss prior to acquisition is recorded as pre-acquisition
incomeloss in the consolidated statement of income. Goodwill represents the excess of the acquisition cost over the fair value of the Group’s share of the net assets of the acquired
subsidiaries at the date of acquisition. Goodwill is amortised over a period of 5 - 20 years using the straight-line method. Management determines the estimated useful life of goodwill based on its evaluation at the time of the acquisition, considering
inherent factors to acquired companies.
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Adaro Energy Annual Report 2008 www.adaro.com
Adaro in Summary From Us to You
Running Adaro Management Report
Owning Adaro
PT ADARO ENERGY Tbk Schedule 56
FORMERLY PT PADANG KARUNIA AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2008 AND 2007 Expressed in million Rupiah, unless otherwise stated
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
b. Principles of consolidation continued
Mining properties represent the fair value adjustment of mining properties acquired at the date of acquisition of Adaro and are stated at cost. Mining properties are amortised over the life of the property using the units of production method from the date
of the acquisition based on estimated reserves. Changes in estimated reserves are accounted for on a prospective basis, from the beginning of the period in which the change occurs.
c. Foreign currency translation
Transactions denominated in currencies other than Rupiah are converted into Rupiah at the exchange rate prevailing at the date of the transaction. At the balance sheet date, monetary assets and liabilities in currencies other than Rupiah are
translated at the exchange rate prevailing at the balance sheet date. Exchange gains and losses arising from the translation of monetary assets and liabilities in currencies other than Rupiah are recognised in the consolidated statement of income. As at
the balance sheet date, the exchange rates used, based on middle rates published by Bank Indonesia, were as follows Rupiah full amount:
2008 2007
US Dollars “US” 10,950
9,419 Great Britain Pound Sterling “
ǧ” 15,803
18,804 Hong Kong Dollars “HK”
1,413 1,208
Malaysian Ringgit “RM” 3,153
2,828 Singapore Dollars “S”
7,607 6,502
Australian Dollars “A” 7,556
8,229 Euro “
¼” 15,432
13,760 Japanese Yen “¥”
121 83
d. Receivables
Receivables are presented at their estimated recoverable value, based on management’s review of the status of each receivable account at the balance sheet date. Receivables are written-off during the period in which they are determined to be
not collectible.
e. Inventories
Coal inventory is valued at the lower of cost or net realisable value. Cost is determined based on the weighted average cost incurred during the period and includes an appropriate portion of fixed and variable overheads. Net realisable value is the
estimated sales amount in the ordinary course of business less the costs of completion and selling expenses. Spare parts, fuel, lubricants and supplies are valued at cost, determined on a first-in, first-out basis, less provision for obsolete
items. Provision for obsolete and slow moving inventory is determined on the basis of estimated future usage or sale of individual inventory items. Supplies of maintenance materials are charged to production costs in the period in which they are
used.
f. Investments in debt and equity securities
Investments in equity securities that do not have readily determinable fair values are recorded using either the equity method or the cost method.
Investments in equity securities in which the Group has between 20 and 50 of the voting rights and over which the Group exercises significant influence, but which it does not control, are accounted for by the equity method. Investments in equity
securities in which the Group has less than 20 of the voting rights and over which the Group exercises no significant influence, are accounted for by the cost method.
Under the equity method, the investment is initially recorded at cost and the carrying amount is increased or decreased to recognise the Group’s share of the profits or losses of the investee after the date of acquisition. Profit distributions except
stock dividends received from the investee reduce the carrying amount of the investment. Under the cost method, the Group records its investments in investees at cost. The Group recognises income only to the extent that it receives profit distributions
except stock dividends from the accumulated net profits of the investee.
For investments in debt and equity securities that have readily determinable fair values, the Group classifies its investments in securities into the following categories: trading, held-to-maturity and available-for-sale. The classification is dependent on the
purpose for which the investments are acquired. Management determines the classification of its investments at the time of the purchase and re-evaluates the designation on a regular basis. Investments that are acquired principally for the purpose of
generating a gain from short-term maximum of three months fluctuations in price are classified as trading investments and included in current assets.
