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
21
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued l.
Property, plant and equipment - direct acquisitions continued
The Company and its subsidiaries periodically evaluate its property, plant and equipment for impairment, whenever events and circumstances indicate that the carrying amount of the assets
may not be recoverable. When the carrying amount of an asset exceeds its estimated recoverable amount, the asset is written-down to its estimated recoverable amount, which is
determined based upon the greater of its fair value less cost to sell or value in use. Spare parts and servicing equipment are carried as inventory and recognized in profit or loss as
consumed. Major spare parts and stand-by equipment that are expected to be used for more than 12 months are recorded as part of property, plant and equipment.
When assets are retired or otherwise disposed of, their cost and the related accumulated depreciation are eliminated from the consolidated statement of financial position, and the
resulting gains or losses on the disposal or sale of property, plant and equipment are recognized in the consolidated statement of comprehensive income.
Certain computer hardware can not be used without the availability of certain computer software. In such circumstance, the computer software is recorded as part of the computer hardware. If any
computer software is independent from its computer hardware, it is recorded as part of intangible assets.
The cost of maintenance and repairs is charged to the consolidated statement of comprehensive income as incurred. Significant renewals and betterments are capitalized.
Property under construction is stated at cost until construction is completed, at which time it is reclassified to the specific property, plant and equipment account to which it relates. During the
construction period until the property is ready for its intended use or sale, borrowing costs, which include interest expense and foreign currency exchange differences incurred to finance the
construction of the asset, are capitalized in proportion to the average amount of accumulated expenditures during the period. Capitalization of borrowing cost ceases when the construction
has been completed and the asset is ready for its intended use.
Equipment temporarily unused is reclassified into equipment not used in operation and depreciated over their estimated useful life using straight-line method.
m. Leases
A lease is classified as a finance lease or operating lease based on the substance not the form of the contract. Property, plant and equipment under finance lease is recognized if the lease
transfers substantially all the risks and rewards incidental to ownership.
Finance leases are recognized as assets and liabilities in the statement of financial positions as the amounts equal to the fair value of the leased assets or, if lower, the present value of the
minimum lease payments. Any initial direct costs of the Company and its subsidiaries are added to the amount recognized as an asset.
Minimum lease payments shall be apportioned between the finance charge and the reduction of the outstanding liability. The finance charge shall be allocated to each period during the lease
term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents shall be charged as expenses in the periods in which they are incurred.
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
22
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued m. Leases continued
Leased assets are depreciated using the same method with and based on the useful lives as estimated for directly acquired property, plant and equipment. However, if there is no reasonable
certainty that the Company and its subsidiaries will obtain ownership by the end of the lease term, the leased assets are fully depreciated over the shorter of the lease term and their economic
useful lives.
Leasing arrangements that do not meet the above criteria are accounted for as operating leases for which payments are charged as an expense on the straight-line basis over the lease period.
n. Deferred charges for land rights
Costs incurred to process and extend land rights held by the Company and its subsidiaries are deferred and amortized using the straight-line method over the term of the land rights.
o. Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if
payment is due within one year or less or in the normal operating cycle of the business if longer. If not, they are presented as non-current liabilities.
Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest menthod.
p. Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds net of transaction
costs and the redemption value is recognized in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee
is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity
services and amortized over the period of the facility which it relates.
q. Foreign currency translation The functional currency of the Company and its subsidiaries is the Indonesian Rupiah and the
accounting records of the Company and its subsidiaries are maintained in Indonesian Rupiah. Transactions in foreign currencies are translated into Indonesian Rupiah at the rates of exchange
prevailing at transaction date. At the consolidated statement of financial position date, monetary assets and monetary liabilities balances denominated in foreign currencies are translated into
Indonesian Rupiah based on the buy and sell rates quoted by Reuters prevailing at the consolidated statement of financial position date as follows:
