Basis of preparation of financial statements

PERUSAHAAN PERSEROAN PERSERO P.T. TELEKOMUNIKASI INDONESIA Tbk AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued DECEMBER 31, 2010 AUDITED AND MARCH 31, 2011 UNAUDITED AND THREE MONTHS PERIOD ENDED MARCH 31, 2010 AND 2011 UNAUDITED Figures in tables are presented in millions of Rupiah, unless otherwise stated 23

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

f. Investments Since January 1, 2011, the Company and its subsidiaries have adopted PSAK 12 Revised 2009, “Interests in Joint Ventures” and PSAK 15 Revised 2009 “Investments in Associates”, which became effective for financial statement periods beginning on or after January 1, 2011 and is applied retrospectively. i. Time deposits Time deposits with maturities of more than three months but not more than one year, are presented as temporary investments. ii. Investments in securities Investments in available-for-sale securities and trading securities are stated at fair value. Unrealized holding gains or losses on available-for-sale securities are excluded from income of the current year and are reported as a separate component in the stockholders’ equity section until realized. Realized gains or losses from the sale of available-for-sale securities are recognized in the consolidated statements of comprehensive income, and are determined on a specific-identification basis. A decline in the fair value of any available-for-sale securities below cost that is deemed to be other-than-temporary and is charged to the consolidated statements comprehensive of income. Gains or losses arising from changes in fair value of the trading secuirites are presented in the income statement within other expenses income in the period in which they arise. iii. Investments in associated companies Investments in companies where the Company has 20 to 50 of the voting rights, and through 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 incurred legal or constructive obligations or made payments on behalf of the associate. Investment in joint ventures is accounted by using the equity method whereby the participation in a joint venture initially recorded at cost and subsequently adjusted for changes in the shares of the venturer of the joint venture’s net assets that occurred after the acquisition.