PT SUMMARECON AGUNG Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2017 and for the Six-Month Periods Then Ended Expressed in thousands of Indonesian Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED z. Events after the financial reporting period
Post year-end events that provide additional information about the Group’s position at reporting period adjusting events are reflected in the consolidated financial statements. Post year-end events that are not adjusting events are
disclosed in the notes to the consolidated financial statements when material.
3. MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated financial statements require management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent
liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
Judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from
those involving estimations and assumptions, which have the most significant effect on the amounts recognized in the consolidated financial statements:
• Revenue recognition
When a contract for the sale of a property upon completion of construction is judged to be a construction contract see revenue recognition policy for sales of property under development Notes 2p, revenue is recognized using the
percentage-of-completion method as construction progress. The percentage of completion is made by reference to the stage of completion of the project or contract, determined based on the proportion of the contract costs incurred to
date to the total estimated costs of the project or contract.
• Classification of financial assets and liabilities
The Group determines the classifications of certain assets and liabilities as financial assets and financial liabilities by judging if they meet the definition set forth in PSAK 55. Accordingly, the financial assets and financial liabilities are
accounted for in accordance with the Group’s accounting policies disclosed in Note 2u.
• Classification of property
The Group determines 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 Group, 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 Group develops and intends to sell before or on completion of construction.
•
Valuation of property The fair value of land and buildings disclosed under the “Fixed assets” and “Investment properties” accounts are
determined by independent real estate valuation experts using recognized valuation techniques. These techniques comprise the cost approach and market and revenue valuation methods. In some cases, the fair value is determined
based on recent real estate transactions with similar characteristics and location to those of the Group’s assets. Total fair value as of December 31, 2016 is disclosed in Notes 11 and 12 to the consolidated financial statements.
•
Operating lease contracts - the Group as lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has
determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of the leased property and, therefore, it accounts for the leases as operating leases.
PT SUMMARECON AGUNG Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2017 and for the Six-Month Periods Then Ended Expressed in thousands of Indonesian Rupiah, unless otherwise stated
32
3. MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS Estimates and Assumptions
