PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued DECEMBER 31, 2004 AND 2005, AND FOR YEARS ENDED
DECEMBER 31, 2004 AND 2005 Figures in tables are presented in millions of Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
g. Investments continued
iii. Investments in associated companies Investments in shares of stock in which the Company has 20 to 50 of the voting rights, and
over 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 guaranteed obligations of the associated company or committed to provide further financial support to the associated
company.
On a continuous basis, but no less frequently than at the end of each year, the Company evaluates the carrying amount of its ownership interests in investee companies for possible
impairment. 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 investee 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, projected discounted cash flows or other valuation techniques as appropriate.
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 statement of income upon the sale of an interest in the associate in proportion with percentage
of the interest sold. The functional currency of PT Pasifik Satelit Nusantara and PT Citra Sari Makmur is the U.S.
Dollar. For the purpose of reporting these investments using the equity method, the assets and liabilities of these companies as of the balance sheet 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, 2004 AND 2005, AND FOR YEARS ENDED
DECEMBER 31, 2004 AND 2005 Figures in tables are presented in millions of Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
g. Investments continued
iv. Other investments Investments in shares of stock with ownership interests of less than 20 that do not have
readily determinable fair values and are intended for long-term investments are carried at cost and are adjusted only for other-than-temporary decline in the value of individual investments.
Any such write-down is charged directly to income of the current year.
h. Trade and other accounts receivable
Trade and other accounts receivable are recorded net of an allowance for doubtful accounts, based upon a review of the collectibility of the outstanding amounts at the end of the year. Accounts are
written off against the allowance during the period in which they are determined to be not collectible.
Trade and other accounts receivable are recorded at the invoiced amount. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the
Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience. The Company reviews its allowance for doubtful accounts
monthly. Past due balances over 90 days for retail customers are fully provided, and past due balance for non-retail customers over a specified amount are reviewed individually for
collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not
have any off-balance sheet credit exposure related to its customers.
i. Inventories
Inventories, principally consist of components and modules, which are transferred to Property, Plant and Equipment upon use. Inventories also include Subscriber Identification Module “SIM”
card, Removable User Identity Module “RUIM” card and prepaid voucher blanks. Cost is determined using the weighted average method for components, SIM card, RUIM card and
prepaid voucher blanks, and the specific-identification method for modules. Allowance for obsolescence is primarily based on the estimated forecast of future usage of these
items.
j. Prepaid expenses
Prepaid expenses are amortized over their beneficial periods using the straight-line method.
PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued DECEMBER 31, 2004 AND 2005, AND FOR YEARS ENDED
DECEMBER 31, 2004 AND 2005 Figures in tables are presented in millions of Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
k. Property, plant and equipment – direct acquisitions
Property, plant and equipment directly acquired are stated at cost, except for certain revalued assets, less accumulated depreciation and impairment losses.
Property, plant and equipment, except land, are depreciated using the straight-line method, based on the estimated useful lives of the assets as follows:
Years
Buildings 20
Switching equipment 5—15
Telegraph, telex and data communication equipment 5—15
Transmission installation and equipment 5—20
Satellite, earth station and equipment 3—15
Cable network 5—15
Power supply 3—10
Data processing equipment 3—10
Other telecommunications peripherals 5
Office equipment 3—5
Vehicles 5—8
Other equipment 5
Land is stated at cost and is not depreciated. 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 net selling price or value in use.
The cost of maintenance and repairs is expensed as incurred. Expenditures, which extend the useful life of the asset or result in increased future economic benefits such as increase in capacity
or improvement in the quality of output or standard of performance, are capitalized and depreciated based on the applicable depreciation rates.
When assets are retired or otherwise disposed of, their carrying values and the related accumulated depreciation are eliminated from the consolidated financial statements, and the resulting gains or
losses on the disposal or sale of property, plant and equipment are recognized in the statement of income.
Computer software used for data processing is included in the value of the associated hardware. Property under construction is stated at cost until construction is complete, at which time it is
reclassified to the specific property, plant and equipment account to which it relates. During the construction period, borrowing costs, which include interest expense and foreign 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 assets are ready for its intended use.
