SMRA Interim Acc - Q2 2012 Eng

PT Summarecon Agung Tbk and Subsidiaries

Consolidated financial statements as of 30 June 2012 (unaudited) and

31 December 2011 (audited)

Table of Contents

Page

Consolidated Statements of Financial Position 1 - 2

Consolidated Statements of Comprehensive Income 3

Consolidated Statements of Changes in Stockholders’ 4

Consolidated Statements of Cash Flows 5 - 6

The accompanying notes form an integral part of these consolidated financial statements.

Notes 30 June 2012 31 December 2011

ASSETS

Cash and cash equivalents 2e,2w,4,34 1,903,610,716 1,495,900,816 Investments in associates and others companies 2c,2f,2w,5 3,698,761 3,698,761

Trade receivables 2g,2w,6,15

Related parties 2h,33 1,118,054 10,252,933

Third parties 46,234,739 24,174,184

Other receivables 2g,2w,7 45,229,663 40,090,573

Inventories 2i,2n,8 2,658,764,100 2,741,082,409

Prepaid expenses 2j,9 13,264,428 12,649,470

Prepaid taxes 2t,20a 246,151,260 211,933,572

Advances 10 342,212,469 223,937,375

Due from related parties 2h,2w,33 520,510 2,523,814

Undeveloped land 2k,11,15,16 1,780,455,662 843,581,916

Fixed assets - net of accumulated depreciation of Rp193,920,294 in 2012, and Rp171,344,547 in 2011

2l,12,15 279,538,006 304,426,776

Investment properties - net of accumulated depreciation of Rp449,646,720 in 2012, and Rp408,210,407 in 2011

2m,2n,13,1 5,16

2,147,105,569 1,925,426,080

Deferred tax assets – net 2t 4,613,230 4,726,822

Other assets 2e,2l,2w,14

,15, 34,36l,37

129,537,299 254,769,180

TOTAL ASSETS 9,602,054,466 8,099,174,681

The accompanying notes form an integral part of these consolidated financial statements.

Notes 30 June 2012 31 December 2011 LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Loans from banks and financing institutions 2w,8,15,34 862,630,263 841,780,461 Bonds payable and sukuk ijarah - net 2w,8,16 298,806,945 298,499,099

Trade payables to third parties 2w,17,34 402,044,158 246,765,162

Other payables 2b,2w,18,28,34 265,335,290 54,543,924

Due to related parties 2h,2w,33 390,998,012 290,760,255

Accrued expenses 2w,19 253,327,009 166,779,564

Taxes payable 20b 26,536,693 37,844,822

Employee benefits liabilities 2r,2l 63,395,912 57,400,554

Deposits received 2q,2w,22,34

Related parties 2h,33 15,223,467 20,740,238

Third parties 4,079,329,218 3,399,949,070

Unearned revenues 2q,23 225,793,735 205,550,972

Deferred tax liabilities - net 2t 1,749,974 1,460,610

TOTAL LIABILITIES 6,885,170,676 5,622,074,731

STOCKHOLDERS’ EQUITY

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY Capital stock

Authorized - 10,000,000,000 shares at par value of Rp100 (full amount) each

Issued and fully paid - 6,873,140,840 shares in 2012 dan 2011

1b,25,26 687,314,084 687,314,084

Additional paid-in capital - net 1b,2p,25,26 245,355,554 245,355,554 Differences arising from changes in the equity of

Subsidiary

56,506 56,506

Retained earnings

Appropriated - general reserve 27 49,779,199 45,892,133

Unappropriated 1,634,298,665 1,485,577,897

Equity Attributable to :-

Owners of the Company 2b,24 2,616,804,008 2,464,196,174

Non-controlling Interests 100,079,782 12,903,776

TOTAL STOCKHOLDERS’ EQUITY 2,716,883,790 2,477,099,950

The accompanying notes form an integral part of these consolidated financial statements.

Notes 30 June 2012 30 June 2011

NET REVENUES 2h,2q,29,33 1,514,619,828 938,578,585

COST OF SALES AND DIRECT COSTS 2q,30 759,376,162 486,932,929

GROSS PROFIT 755,243,666 451,645,656

Selling expenses 2q,31 93,529,454 55,523,580

General and administrative expenses 2q,31 252,426,960 172,343,687

Other operating income (11,898,622) (11,580,847)

Other operating expenses 1,603,034 746,011

INCOME FROM OPERATIONS 419,582,840 234,613,225

Finance income 2s 28,248,053 27,200,437

Gain on foreign exchange - net 321,817 718,530

Gain (loss) on derivative instrument 2w,37 23 43,812

Finance costs 32 (54,966,746) (42,723,253)

PROFIT BEFORE INCOME TAX 393,185,987 219,852,751

INCOME TAX BENEFIT (EXPENSE) 2t

Current (85,746,489) (64,359,649)

Deferred (331,568) (143,853)

Income tax expense - net (86,078,057) (64,503,502)

PROFIT FOR THE YEAR 307,107,930 155,349,249

OTHER COMPREHENSIVE INCOME -

-TOTAL COMPREHENSIVE INCOME FOR THE YEAR 307,107,930 155,349,249

PROFIT FOR THE YEAR ATTRIBUTABLE TO:

Owners of the Company 310,690,073 155,086,575

Non-controlling interests 2b,24 (3,582,143) 262,674

TOTAL 307,107,930 155,349,249

The accompanying notes form an integral part of these consolidated financial statements.

Notes 30 June 2012 30 June 2011

TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO:

Owners of the Company 310,690,073 155,086,575

Non-controlling interests 2b,24 (3,582,143) 262,674

TOTAL 307,107,930 155,349,249

EARNINGS PER SHARE ATTRIBUTABLE TO

OWNERS OF THE COMPANY (full amount)

2u,25,26

45 23

The accompanying notes form an integral part of these consolidated financial statements.

Equity Attributable to Owners of the Company

Notes

Retained earnings

Issued and fully paid capital

stock

Additional paid-in capital-net

Differences arising from changes in the

equity Subsidiary

Appropriated –

reseve fund Unappropriated Total

Non-controlling Interests

Total Stockholders’

Equity

Balance as of 1 January 2011

687,314,084 245,355,554 56,506 43,557,354 1,163,603,329 2,139,886,827 17,646,601 2,157,533,428

Appropriation for general

reserve - - - 2,334,779 (2,334,779) - - -

Cash dividend (68,731,400) (68,731,400) (68,731,400)

Profit for the six month - - - - 155,086,575 155,086,575 262,674 155,349,249

Balance as of 30 June 2011 687,314,084 245,355,554 56,506 45,892,133 1,247,623,725 2,226,242,002 17,909,275 2,244,151,277

Balance as of 1 January 2012

687,314,084 245,355,554 56,506 45,892,133 1,485,577,897 2,464,196,174 12,903,776 2,477,099,950

Appropriation for general

reserve 3,887,066 (3,887,066) - - -

Cash dividend (158,082,239) (158,082,239) (158,082,239)

Profit for the six month - - - - 310,690,073 310,690,073 (3,582,143) 307,107,930

Changes in non-controlling

interests 24 - - - 90,758,149 90,758,149

The accompanying notes form an integral part of these consolidated financial statements.

Notes 30 June 2012 30 June 2011

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers 2,177,237,061 1,351,611,808

Cash paid to:

Suppliers (1,512,627,614) (935,199,574)

Employees (156,232,843) (109,858,277)

Cash receipts(paid) for other operating 69,846,936 (106,953,255)

Receipts of interest income 28,248,053 27,200,437

Payments of:

Income taxes (155,469,561) (133,074,446)

Interest expense (54,874,484) (40,486,909)

Net cash provided by operating activities 396,127,548 53,239,784

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of fixed assets and investment properties

153,970

-Decrease(increase) in amounts due from related parties

33 2,003,304 (2,881,899)

Acquisitions of fixed assets and investment properties

12,13 (258,177,466) (144,159,931)

Decrease(increase) in other assets 14 147,153,718 (2,236,141)

Investment in associates and other entities - (500,000)

Net cash used in investing activities (108,866,474) (149,777,971)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds of loans from banks and financing institutions

167,082,097 253,156,395

Decrease in amounts due to related parties 33 100,237,756 26,596,793 Repayment of loans from banks and financing

institutions

(148,987,859) (91,115,735)

Cash dividends paid by the Company (57)

-Proceeds from (deposits to) restricted time deposits

2,567,389 11,651,500

(Increase) decrease in derivative assets (38,500)

-Net cash provided by financing activities 120,860,826 200,288,953

NET INCREASE IN CASH AND CASH

The accompanying notes form an integral part of these consolidated financial statements.

Notes 30 June 2012 30 June 2011

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

4 1,495,900,816 1,120,483,310

EFFECT OF FOREIGN EXCHANGE 15 (412,000) (1,470,400)

CASH AND CASH EQUIVALENTS AT END OF YEAR

4

1. GENERAL

a. The Company’s Establishment

PT Summarecon Agung Tbk (the “Company”) was established within the framework of the Domestic Capital Investment Law based on notarial deed No. 308 dated 26 November 26 1975 of Ridwan Suselo, S.H. The Company’s articles of association was approved by the Ministry of Justice in its Decision Letter No. YA 5/344/6 dated 12 July 1977 and was published in Supplement No. 597 of State Gazette No. 79 dated 4 October 1977. The articles of association has been amended from time to time, the latest amendments of which were drawn up in : (a) notarial deed No. 44 dated 18 July 2008 of Fathiah Helmi, S.H., which was published in Supplement No. 15805 of State Gazette No. 48 dated 16 June 2009, concerning the increase in the Company’s issued and fully paid capital stock through the distribution of bonus shares from the capitalization of additional paid-in capital (Notes 25 and 26) and compliance with the Corporation Law No. 40 of Year 2007,which amendment was approved by the Ministry of Law and Human Rights in its Decision Letter No. AHU-50104.AH.01.02 dated 12 August 2008, and (b) notarial deed No. 13 dated 5 June 2009 of Fathiah Helmi S.H., concerning the change in the composition of the Company’s boards of directors and commissioners, which amendment was acknowledged and recorded by the Ministry of Law and Human Rights based on its Decision Letter No. AHU-AH.01.10-10706 dated 17 July 2009.

According to Article 3 of the Company’s articles of association, its scope of activities comprises real estate development, leasing of properties and operating recreational facilities and restaurants. The Company's head office is located in Plaza Summarecon, Jl. Perintis Kemerdekaan Kav. No. 42, Jakarta.

The Company started commercial operations in 1976.

PT Semarop Agung is the ultimate parent company of the Company and Subsidiaries.

b. Company’s Public Offerings

The Chairman of the Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK), through his letter No. SI-085/SHM/MK.10/1990 dated 1 March 1990, declared effective at that date, the offering of 6,667,000 Company shares with a par value of Rp1,000 (full amount) per share to the public at an offering price of Rp6,800 (full amount) per share. The Company listed all its issued shares on the Jakarta Stock Exchange on 14 August 1996 (Note 26).

Based on the minutes of the stockholders’ extraordinary meeting which were notarized under deed No. 191 dated 21 June 1996 of Sutjipto, S.H., the stockholders approved the reduction in the par value of the Company’s shares from Rp1,000 (full amount) to Rp500 (full amount) per share. The amendment was approved by the Ministry of Justice in its Decision Letter No. C2.9225.HT.01.04.TH.96 dated 27 September 1996.

Based on the minutes of the stockholders’ extraordinary meeting which were notarized under deed No. 99 dated 21 June 2002 of Sutjipto, S.H., the stockholders approved the reduction in the par value of the Company’s shares from Rp500 (full amount) to Rp100 (full amount) per share. The amendment was approved by the Ministry of Law and Human Rights in its Decision Letter No. C-12844 HT.01.04.TH.2002 dated 12 July 2002.

In 2005, the Company issued additional 93,676,000 shares with a par value of Rp100 (full amount) per share which were subscribed for and fully paid by Valence Asset Limited, British Virgin Islands, at an offering price of Rp775 (full amount) per share. The Company listed all the additional shares issued on the Jakarta Stock Exchange on 17 November 2005. This increase in the issued and fully paid capital stock was made under BAPEPAM-LK Regulation No. IX.D.4., Attachment of the Chairman of BAPEPAM-LK Decision No. Kep-44/PM/1998 dated 14 August 1998 regarding additional shares issuance without pre-emptive rights (Note 26).

In 2006, the Company distributed 786,881,920 bonus shares with a par value of Rp100 (full amount) per share (Note 26).

Rights to the Stockholders with the Issuance of Pre-emptive Rights, totaling 459,014,453 new shares and a maximum of 229,507,226 Series I Warrants was declared effective. The Company listed all such new shares on the Indonesia Stock Exchange (Notes 25 and 26).

In June 2008, the Company distributed 3,217,893,796 bonus shares with a par value of Rp100 (full amount) per share (Notes 25 and 26).

In June 2010 and December 2009, 436,340,202 and 1,013,046 Series I Warrants were exercised, respectively (Note 25).

c. Commissioners, Directors, Audit Committee and Employees

The composition of the Company's Boards of Commissioners and Directors as of 30 June 2012 is as follows:

Board of Commissioners Directors

President Commissioner

: Soetjipto Nagaria President Director : Johanes Mardjuki

Commissioner : Harto Djojo Nagaria Director : Liliawati Rahardjo Independent

Commissioner

: H. Edi Darnadi Director : Lexy Arie Tumiwa

Independent Commissioner

: Esther Melyani Homan

Unaffiliated Director

: Lilies Yamin

Director : Soegianto Nagaria

Director : Herman Nagaria

Director : Yong King Ching

The composition of the Company's Boards of Commissioners and Directors as of 31 December 2011 is as follows:

Board of Commissioners Directors

President Commissioner

: Soetjipto Nagaria President Director : Johanes Mardjuki

Commissioner : Harto Djojo Nagaria Director : Liliawati Rahardjo Independent

Commissioner

: H. Edi Darnadi Director : Lexy Arie Tumiwa

Independent Commissioner

: Esther Melyani Homan

Unaffiliated Director

: Lilies Yamin

Director : Soegianto Nagaria

Director : Herman Nagaria

Director : Yong King Ching

The composition of the Company’s Audit Committee as of 30 June 2012 and 31 December 2011 is as follows:

Chairman : H. Edi Darnadi

Member : Poespita Pelangiwati

Member : Esther Melyani Homan

Salaries and other compensation benefits of the boards of Commissioners and Directors amounted to approximately Rp15.6 billion and Rp13 billion respectively in 30 June 2012 and 30 June 2011. The Company and Subsidiaries had 1,405 and 1,391 permanent employee as of 30 June 2012 and 31 December 2011.

liabilities, comparative information and consistency, and introduces new disclosures such as key estimations and judgments, capital management, other comprehensive income, departures from accounting standards and statement of compliance.

The adoption of PSAK 1 (Revised 2009) has significant impact on the related presentation and disclosures in the consolidated financial statements.

The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those applied in the preparation of the consolidated financial statements for the year ended 31 December 2010, except for the adoption of several amended PSAKs effective 1 January 2011 as disclosed in this note

The consolidated financial statements have been prepared on the accrual basis using the historical cost concept of accounting, except for certain accounts which are measured on the basis described in the related accounting policies for those accounts.

The consolidated statements of cash flows present cash flows classified into operating, investing and financing activities. The cash flows from operating activities are presented using the direct method.

The reporting currency used in the consolidated financial statements is the Indonesian rupiah (Rp).

b. Principles of consolidation

From 1 January 2011

Effective 1 January 2011, the Company and Subsidiaries retrospectively adopted PSAK 4 (Revised 2009), “Consolidated and Separate Financial Statements”, except for the following items that were applied prospectively: (i) losses of a subsidiary that result in a deficit balance to non-controlling interests (“NCI”); (ii) loss of control over a subsidiary; (iii) change in the ownership interest in a subsidiary that does not result in a loss of control; (iv) potential voting rights in determining the existence of control; (v) consolidation of a subsidiary that is subject to long-term restriction.

PSAK 4 (Revised 2009) provides for the preparation and presentation of consolidated financial statements for a group of entities under the control of a parent, and the accounting for investments in subsidiaries, jointly controlled entities and associated entities when separate financial statements are presented as additional information.

As reflected herein, the adoption of PSAK 4 (Revised 2009) has insignificant impact on the financial reporting including for the related disclosures in the consolidated financial statements.

All material intercompany transactions and account balances (including the related significant unrealized gains or losses) have been eliminated.

The consolidated financial statements include the accounts of the Company and Subsidiaries mentioned in Note 1d, in which the Company maintains (directly or indirectly) equity ownership of more than 50%.

Subsidiaries are fully consolidated from the date of acquisitions, being the date on which the Company obtains control, and continue to be consolidated until the date such control ceases. Control is presumed to exist if the Company owns, directly or indirectly through Subsidiaries, more than half of the voting power of an entity. Control also exists when the Company owns half or less of the voting power of an entity when there is:

a) power over more than half of the voting rights by virtue of an agreement with other investors;

b) b)power to govern the financial and operating policies of the entity under a statute or an agreement;

c) power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; or

d) power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.

Losses of a non-wholly owned subsidiary are attributed to the NCI even if they create an NCI deficit balance.

In case of loss of control over a subsidiary, the Company:

 derecognizes the assets (including goodwill) and liabilities of the subsidiary;  derecognizes the carrying amount of any NCI;

 derecognizes the cumulative translation differences, recorded in equity, if any;  recognizes the fair value of the consideration received;

 recognizes the fair value of any investment retained;

 recognizes any surplus or deficit in the consolidated statements of comprehensive income; and

 reclassifies its share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate.

NCI represent the portion of the profit or loss and net assets of the Subsidiaries not attributable, directly or indirectly, to the Company, which are presented in the consolidated statements of comprehensive income and under the equity section of the consolidated statements of financial position, respectively, separately from the corresponding portion attributable to the owners of the Company.

Prior to 1 January 2011

The proportionate shares of minority stockholders in net assets and net income or loss of the consolidated subsidiaries were previously presented as “Minority Interests” in the consolidated statements of financial position and as “Minority Interests in Net Loss (Income) of Subsidiaries” in the consolidated statements of comprehensive income.

The losses applicable to the minority interests in a Subsidiary may have exceeded the minority interests in the equity of the Subsidiary. The excess and any further losses applicable to the minority interests were absorbed by the Company as the majority stockholder, except to the extent that the minority interests had other long-term interest in the related Subsidiary or had binding obligations for, and were able to make good of, the losses. If the Subsidiary subsequently reported profits, all such profits were allocated to the majority interest holder, in this case, the Company, until the minority interests’ share of losses previously absorbed by the Company was recovered.

Effective 1 January 2011, the Company applied PSAK 15 (Revised 2009), “Investments in Associates”. This PSAK is applied retrospectively and prescribes the accounting for investments in associates in relation to the determination of significant influence, accounting method to be applied, impairment in value of investments and separate financial statements. The adoption of this PSAK has no significant impact on the consolidated financial statements.

c. Business combination

Effective 1 January 2011, the Company and Subsidiaries prospectively adopted PSAK 22 (Revised 2010), “Business Combinations”, applicable for business combinations that occur on or after the beginning of a financial year/period commencing on or after 1 January 2011.

PSAK 22 (Revised 2010) stipulates the nature of transaction or other event that meets the definition of a business combination to improve the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination and its effects.

In accordance with the transitional provisions of PSAK 22 (Revised 2010), starting 1 January 2011, the Company and Subsidiaries:

 ceased the goodwill amortization (Note 18);

 eliminated the carrying amount of the related accumulated amortization of goodwill; and  performed an impairment test of goodwill in accordance with PSAK 48 (Revised 2009),

“Impairment of Assets”.

The adoption of PSAK 22 (Revised 2010) has insignificant impact on the financial reporting, including for the related disclosures in the consolidated financial statements.

From 1 January 2011

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition-date fair value and the amount of any NCI in the acquiree. For each business combination, the acquirer measures the NCI in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are directly expensed and included in administrative expenses.

When the Company and Subsidiaries acquire a business, it assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree

If the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognized in accordance with PSAK 55 (Revised 2006) either in profit or loss or as other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity.

At acquisition date, goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for NCI over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognized in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company and Subsidiaries’ cash-generating units (“CGUs”) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those CGUs.

Where goodwill forms part of a CGU and part of the operations within that CGU is disposed of, the goodwill associated with the operations disposed of is included in the carrying amount of the operations when determining the gain or loss on disposal of the operations. Goodwill disposed of in this circumstance is measured based on the relative values of the operations disposed of and the portion of the CGU retained.

Prior to 1 January 2011

In comparison to the above, the following were the accounting policies applied on business combination prior to 1 January 2011:

i. business combinations were accounted for using the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The NCI (formerly

known as minority interest) was measured at the book value of the proportionate share of the acquiree’s identifiable net assets;

ii. business combinations achieved in stages were accounted for as separate steps. Any additional acquired equity interest did not affect previously recognized goodwill;

iii. when the Company and Subsidiaries acquired a business, embedded derivatives separated from the host contract by the acquiree were not reassessed on acquisition unless the business combination resulted in a change in the terms of the contract that significantly modified the cash flows that otherwise would have been required under the contract;

iv. contingent consideration was recognized if, and only if, the Company and Subsidiaries had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognized as part of goodwill.

d. Interest in joint ventures

SCK has interests in joint ventures, which are jointly controlled entities, known as KSO Summarecon Serpong (KSO SS), between SCK and PT Jakartabaru Cosmopolitan (JBC); and KSO Summarecon Lakeview (KSO LV), among SCK, PT Telaga Gading Serpong (TGS) and PT Lestari Kreasi (LK), whereby the ventures have contractual arrangements that establish joint control over the economic activities of the entities. The agreements require unanimous agreements for financial and operating decisions among the venturers.

In accordance with PSAK 12 (Revised 2009), “Interests in Joint Ventures”, SCK’s participation in the joint operation has been accounted for in the consolidated financial statements using the proportionate consolidation method. In applying the proportionate consolidation method, the venturer combines its proportionate share in the assets and liabilities of the joint venture and its interests in the joint venture revenues and expenses with the related accounts in the consolidated financial statements.

e. Cash equivalents

Time deposits with maturities of three months or less at the time of placement, which are not restricted as to withdrawal or are not pledged as collateral for loans, are classified as “Cash Equivalents”. Cash in banks and time deposits which are restricted or pledged are presented as part of “Other Assets”.

f. Investments in associated companies

Effective 1 January 2011, the Company applied PSAK 15 (Revised 2009), “Investments in Associated Companies”. This revised PSAK is applied retrospectively and prescribes the accounting for investments in associated companies in relation to the determination of significant influence, accounting method to be applied, impairment in value of investments and separate financial statements. The adoption of this revised PSAK has no significant impact on the consolidated financial statements.

Investment in associated company is accounted for using the equity method. An associated company is an entity in which the Company or any of the Subsidiaries has significant influence. Under the equity method, the cost of investment is increased or decreased by the Company’s share in net earnings or losses of, and dividends received from, the associated company since the date of acquisition

The consolidated statements of comprehensive income reflect the Company’ equity in the net income of the associated company. Where there has been a change recognized directly in the equity of the associated company, the Company recognizes its share of any such change and discloses this, when applicable, in the consolidated statements of changes in equity. Unrealized gains and losses resulting from transactions between the Company and the associated company are eliminated to the extent of the Company’s interest in the associated company.

Company’s investment in its associated company. The Company determines at each reporting date whether there is any objective evidence that the investment in the associated company is impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the investment in associated company and its carrying value, and recognizes the amount in the consolidated statements of comprehensive income.

g. Allowance for impairment of receivables

Prior to 2010, allowance for impairment was provided based on a review of the status of the individual trade receivables at the end of the year. Starting 2010, the allowance, if any, is determined based on the policies outlined in Note 2w.

h. Transactions with related parties

Effective 1 January 2011, the Company and Subsidiaries applied PSAK 7 (Revised 2010), “Related Party Disclosures”. This revised PSAK requires disclosure of related party relationships, transactions and outstanding balances, including commitments, in the consolidated and separate financial statements of a parent, and also applies to individual financial statements. The adoption of this revised PSAK has insignificant impact on the related disclosures in the consolidated financial statements.

The details of the accounts and the significant transactions entered into with related parties are presented in Note 33.

i. Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined by the specific identification method.

The cost of land under development consists of cost of undeveloped land, direct and indirect development costs related to real estate development activities and borrowing costs. Land under development is transferred to landplots available for sale when the land development is completed. Total project cost is allocated proportionately to the saleable landplots based on their respective areas.

The cost of land development, including land which is used for roads and infrastructure or other unsaleable area, is allocated to the saleable area.

The cost of buildings and apartments under construction is transferred to houses, shops and apartments (strata title) available for sale when the construction is substantially completed.

For residential property project, its cost is classified as part of inventories upon the commencement of development and construction of infrastructure. For commercial property project, upon the completion of development and construction of infrastructure, its cost remains as part of inventories or is reclassified to the related fixed asset account, whichever is more appropriate.

Other inventories, consisting of food, beverages and other inventories, are stated at cost or net realizable value, whichever is lower. Cost is determined using the first-in, first-out method (FIFO).

j. Prepaid expenses

Prepaid expenses are amortized over their beneficial periods.

k. Undeveloped land

Undeveloped land is stated at cost or net realizable value, whichever is lower.

The cost of undeveloped land, consisting of pre-acquisition and acquisition cost of land, is transferred to land under development upon commencement of land development.

l. Fixed assets

land which is not depreciated. Such cost includes the cost of replacing part of the fixed assets when that cost is incurred, if the recognition criteria are met.

Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the fixed assets as a replacement if the recognition criteria are met. All other repairs and maintenance costs that do not meet the recognition criteria are recognized in the consolidated statements of comprehensive income as incurred.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Years

Buildings and infrastructures 3 -40

Machinery and heavy equipment 2 - 5

Vehicles 10

Furniture and office equipment 2 - 5

Construction in progress is stated at cost and is accounted as part of fixed assets. The accumulated costs will be reclassified to the appropriate fixed assets or investment properties account when the construction is completed and the constructed asset is ready for its intended use.

In accordance with PSAK 47 on “Accounting for Land”, land is stated at cost and is not depreciated. Certain costs incurred relating to the cost or renewal of the legal title of a landright are deferred (included as part of Other Assets) and amortized over the estimated useful life of the landright or the term of the landright, whichever period is shorter.

An item of fixed assets is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is credited or charged to operations in the year the asset is derecognized.

The fixed assets’ residual values, useful lives and methods of depreciation are reviewed and adjusted prospectively, if appropriate, at each financial year end.

m. Investment properties

Investment properties are stated at cost, which includes transaction cost, less accumulated depreciation and impairment loss, if any, except for land which is not depreciated. Such cost also includes the cost of replacing part of the investment properties if the recognition criteria are met, and excludes the daily expenses on their usage.

Investment properties consist of land, building and infrastructures, hotel facilities, machinery and heavy equipment and furniture and office equipment held by the Company and Subsidiaries to earn rentals or for capital appreciation or both, rather than for use in the production or supply of goods or services or for administrative purposes or sale in the ordinary course of business.

Depreciation is computed using the straight-line method over the estimated useful lives of the investment properties as follows:

Years

Buildings and infrastructures 3 -40

Machinery and heavy equipment 2 - 5

Vehicles 10

An investment property should be derecognized on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. Gain or loss arising from the retirement or disposal of investment property is credited or charged to operations in the year the asset is derecognized.

Transfers to investment property should be made when, and only when, there is a change in use, evidenced by the end of owner-occupation, commencement of an operating lease to another party or end of construction or development. Transfers from investment property should be made when, and only when, there is a change in use, evidenced by the commencement of owner-occupation or commencement of development with a view to sell.

For a transfer from investment properties to owner-occupied property, the Company uses the cost method at the date of change in use. If an owner-occupied property becomes an investment property, the Company records the investment property in accordance with the fixed assets policies up to the date of change in use.

n. Capitalization of borrowing costs

In accordance with PSAK 26 (Revised 1997) on “Borrowing Costs”, borrowing costs are generally expensed as incurred. Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalization of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the assets are ready for their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount or net realizable value, an impairment loss is recognized.

o. Impairment of non-financial asset value

Effective 1 January 2011, the Company and Subsidiaries prospectively adopted PSAK 48 (Revised 2009), “Impairment of Assets”, including goodwill and assets acquired from business combinations before 1 January, 2011.

PSAK 48 (Revised 2009) prescribes the procedures to be employed by an entity to ensure that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and PSAK 48 (Revised 2009) requires the entity to recognize an impairment loss. PSAK 48 (Revised 2009) also specifies when an entity should reverse an impairment loss and prescribes disclosures.

The Company and Subsidiaries assess at each annual reporting period whether there is an indication that assets may be impaired. If any such indication exists, or when annual impairment testing for assets (i.e., an intangible asset with an indefinite useful life, or an intangible asset not yet available for use) is required, the Company and Subsidiaries make an estimate of their respective asset’s recoverable amount.

An asset’s recoverable amount is the higher of the asset’s or its cash-generating unit’s (“CGU’s”) fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognized in the consolidated statements of comprehensive income as “impairment losses”. In assessing the value in use, the estimated net future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used to determine the fair value of the asset. These calculations are corroborated by valuation multiples or other available fair value indicators.

comprehensive income under expense categories that are consistent with the functions of the impaired assets.

p. Stock issuance costs

Costs incurred in connection with the issuance of capital stock are presented as a deduction to additional paid-in-capital.

q. Revenue and expense recognition

Revenues from real estate sales are recognized in accordance with PSAK 44 on “Accounting for Real Estate Activities”, as follows:

(1) Revenues from sales of houses, shops and other similar property and related land are recognized under the full accrual method if all of the following conditions are met:

1. A sale is consummated. 2. The selling price is collectible.

3. The seller’s receivable is not subject to future subordination to other loans which will be obtained by the buyer.

4. The seller has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property.

(2) Revenues from sales of landplots that do not require the seller to construct the building are recognized under the full accrual method if all of the following conditions are met:

1. Total payments by the buyer are at least 20% of the agreed selling price and the amount is not refundable.

2. The selling price is collectible.

3. The receivable is not subordinated to other loans that will be obtained by the buyer.

4. The land development process is complete so that the seller has no further obligations related to the landplots sold.

5. Only the landplots are sold, without any requirement for the seller’s involvement in the construction of the building on the landplots.

(3) Revenues from sales of apartments, the construction of which has not been completed, are recognized using the percentage-of-completion method if all of the following conditions are met:

1. The construction process has already commenced, that is the building foundation has been completed and all of the requirements to commence construction have been fulfilled. 2. Total payments by the buyer are at least 20% of the agreed selling price and the amount is

not refundable.

3. The amount of revenue and the cost of the property can be reliably estimated.

If any of the above conditions is not met, the payments received from the buyer are recorded as deposits received until all of the criteria are met.

The method used to determine the percentage of completion is the proportion of actual costs incurred to the estimated total development cost of the real estate project.

Rental and membership fees in sports club are recognized as income over the period of rental or membership. Rental and membership fees received in advance are presented as “Unearned Revenues”. Revenues from restaurant operations are recognized when the goods are delivered or when the services have been rendered.

Revenue from other hotel services is recognized when the services are rendered or the goods are delivered.

Expenses are recognized when incurred.

r. Employee benefits

The Company and Subsidiaries have defined contribution pension plans covering substantially all of their eligible employees and have recognized their unfunded employee benefits liability in accordance with Labor Law No. 13/2003 dated March 25, 2003 (“the Law”) and PSAK 24 (Revised 2004), “Employee Benefits”. The benefits under the Law have been calculated by comparing the benefits that will be received by an employee at normal pension age from the Pension Plan with the benefits as stipulated under the Law, after deducting the accumulated employee contributions and the related investment results. If the employer-funded portion of the Pension Plan benefit is less than the benefit as required by the Law, the Company and Subsidiaries provide for such shortfall.

Under PSAK 24 (Revised 2004), the cost of providing employee benefits under the Law is determined using the projected-unit-credit method. Actuarial gains or losses are recognized as income or expenses when the net cumulative unrecognized actuarial gains or losses for each individual plan at the end of the previous reporting year exceed the greater of 10% of the present value of the defined benefit obligation at that date and 10% of the fair value of plan assets at that date. These gains or losses are recognized on a straight-line basis over the expected average remaining working lives of the employees. Further, past service costs arising from the changes in the benefits payable of an existing plan are required to be amortized over the period until the benefits concerned become vested.

s. Foreign currency transactions and balances

Transactions involving foreign currencies are recorded at the rates of exchange prevailing at the time the transactions are made. At consolidated statement of financial position date, monetary assets and liabilities denominated in foreign currencies are adjusted to reflect the prevailing rates at such date, and the resulting gains or losses are credited or charged to current operations.

As of June 2012 and 31 December 2011, the rates of exchange used were as follows:

2012 2011 (Full amounts) (Full amounts)

1 European euro (Euro) 11,801 11,739

1 United States dollar (US$) 9,480 9,068

1 Singapore dollar (Sin$) 7,415 6,974

Transactions in other foreign currencies are considered not significant.

t. Income tax

Based on Government Regulation No. 5 dated 23 March 2002, income from shopping center rental is subject to a final tax of 10%, except for income on rental contracts signed prior to such regulation which is subject to 6%. On 4 November 2008, the President of the Republic of Indonesia and the Minister of Law and Human Rights signed Government Regulation No. 71/2008 (PP No. 71/2008) on “the third changes on PP No. 48/1994 regarding payment of income tax on income from transfer rights on land and/or building”. This regulation provides that, effective 1 January 2009, the income of a taxpayer from transactions of transferring rights on land and/or building, will be subjected to final tax of 5%.

Final income tax

The differences between the carrying amounts of existing assets or liabilities related to the final income tax and their respective tax bases are not recognized as deferred tax assets or liabilities. Current tax expense related to income subject to final income tax is recognized in proportion to total income recognized during the current year for accounting purposes. The difference between the final income tax paid and the amount charged as final income tax expense in the statements of comprehensive income is recognized as prepaid tax or tax payable.

Non-final income tax

Current tax expense is provided based on the estimated taxable income for the year which is subject to non-final income tax rates. Deferred tax assets and liabilities are recognized for the temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. Future tax benefits, such as the carry-forward of unused tax losses, are also recognized to the extent that realization of such benefits is probable.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the consolidated statement of financial position date. Changes in the carrying amount of deferred tax assets and liabilities due to a change in tax rates are charged or credited to current year operations, except to the extent that they relate to items previously charged or credited to stockholders’ equity.

Amendment to a tax obligation is recorded when an assessment is received or, if appealed against by the Company or Subsidiaries, when the result of the appeal is determined.

u. Earnings per share

In accordance with PSAK 56 on “Earnings per Share”, earnings per share amount is calculated by dividing the profit for the year attributable to owners of the Company by the weighted average number of outstanding shares during the year.

v. Segment reporting

Effective 1 January 2011, the Company and Subsidiaries applied PSAK 5 (Revised 2009), “Operating Segments”. This revised PSAK requires disclosures that will enable users of financial statements to evaluate the nature and financial effects of the business activities in which the entity engages and the economic environments in which it operates. The adoption of this revised PSAK has no significant impact on the consolidated financial statements.

An operating segment is a component of the Company and Subsidiaries:

a. that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Company and Subsidiaries),

b. whose operating results are regularly reviewed by the Company’s and Subsdiaries’ chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and

c. for which discrete financial information is available.

Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. They are determined before intra-group balances and intra-group transactions are eliminated.

w. Financial instruments

Starting 1 January 2010, the Company and Subsidiaries have applied PSAK 50 (Revised 2006), “Financial Instruments: Presentation and Disclosures”, and PSAK 55 (Revised 2006), “Financial Instrument: Recognition and Measurement”, which superseded PSAK 50, “Accounting for Certain Investment in Securities”, and PSAK 55 (Revised 1999), “Accounting for Derivative Instruments and Hedging Activities”. PSAK 50 (Revised 2006) and PSAK 55 (Revised 2006) were applied prospectively.

PSAK 50 (Revised 2006) contains the requirements for the presentation of financial instruments and identifies the information that should be disclosed. The presentation requirements apply to the classification of financial instruments, from the perspective of the issuer, into financial assets, financial liabilities and equity instruments; the classification of related interest, dividends, losses and gains, and the circumstances in which financial assets and financial liabilities must be offset. This PSAK requires the disclosure of, among others, information about factors that affect the amount, timing and certainty of an entity’s future cash flows relating to financial instruments and the accounting policies applied to those instruments.

PSAK 55 (Revised 2006) established the principles for recognizing and measuring financial assets, financial liabilities, and some contracts to buy or sell non-financial items. This PSAK provides the definitions and characteristics of a derivative, the categories of financial instruments, recognition and measurement, hedge accounting and determination of hedging relationships, among others.

The transition effect from the prospective adoption of the above revised PSAKs which amounted to Rp3,292,140 has been recorded in retained earnings at 1 January 2010.

i. Financial assets Initial Recognition

Financial assets within the scope of PSAK 55 (Revised 2006) are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets, as appropriate. The Company and Subsidiaries determine the classification of their financial assets at initial recognition and, where allowed and appropriate, re-evaluate this designation at each financial year end. All financial assets are recognized initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the Company and Subsidiaries commit to purchase or sell the assets.

The Company and Subsidiaries have determined that their financial assets are categorized as loans and receivables and available-for-sale financial assets.

Subsequent Measurement  Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. Such financial assets are carried at amortized cost using the effective interest rate method. Gains and losses are recognized in the consolidated statements of comprehensive income when the loans and receivables are derecognized or impaired, as well as through the amortization process.

As of 30 June 2012 and 31 December 2011 the Company and Subsidiaries have cash and cash equivalents, trade and other receivables, due from related parties and other assets-restricted time deposits and cash in bank, in this category.

 Available-For-Sale (AFS) financial assets

AFS financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified as fair value through profit or loss, loans and receivables and held to maturity. After initial measurement, AFS financial assets are measured at fair value with unrealized gains or losses recognized in stockholders’ equity until the investment is derecognized. At that time, the cumulative gain or loss previously recognized in stockholders’ equity is reclassified to comprehensive income as a reclassification adjustment.

The Company has other investments in shares of stock that do not have readily determinable fair value in which the ownership interest is less than 20%. These investments are carried at cost.

ii. Financial liabilities Initial Recognition

Financial liabilities within the scope of PSAK 55 (Revised 2006) are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company and Subsidiaries determine the classification of their financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value which, in the case of loans and borrowings, is inclusive of directly attributable transaction costs.

As of 30 June 2012 and 31 December 2011, the Company’s and Subsidiaries’ financial liabilities include loans from banks and financing institution, bonds payable and sukuk ijarah - net, trade payables to third parties, other payables, due to related parties, accrued expenses, and deposits received - customer deposits.

The Company and Subsidiaries have determined that their financial liabilities are categorized as loans and borrowings and measured at fair value through profit or loss.

Subsequent Measurement  Loans and borrowings

After initial recognition, loans and borrowings are subsequently measured at amortized cost using the effective interest rate method.

Gains and losses are recognized in the consolidated statements of comprehensive income when the liabilities are derecognized as well as through the amortization process.

 Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by PSAK 55 (Revised 2006).

Gains or losses on liabilities held for trading are recognized in the consolidated statements of comprehensive income.

iii. Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated statements of financial position if, and only if, there is a currently enforceable

legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously

iv. Fair value of financial instruments

The fair value of financial instruments that are actively traded in organized financial markets is determined by reference to quoted market bid prices at the close of business at the end of the reporting year. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm’s length market transaction, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis, or other valuation models.

Credit Risk Adjustment

The Company and Subsidiaries adjust the price in the more observable market to reflect any differences in counterparty credit risk between instruments traded in that market and the ones being valued for financial asset positions. In determining the fair value of financial liability positions, the Company and Subsidiaries’ own credit risks associated with the instrument are taken into account.

v. Amortized cost of financial instruments

Amortized cost is computed using the effective interest rate method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate.

vi. Impairment of financial assets

The Company and Subsidiaries assess at each consolidated statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.

 Loans and receivables

For loans and receivables carried at amortized cost, the Company and Subsidiaries first assess whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company and Subsidiaries determine that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics, and the group is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a “loans and receivables” financial asset has a variable interest rate, the discount rate for measuring impairment loss is the current effective interest rate.

The carrying amount of the financial asset is reduced through the use of an allowance for impairment account and the amount of the loss is recognized in the consolidated statements of comprehensive income. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the financial asset. Loans and receivables, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company and Subsidiaries. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized

impairment loss is increased or reduced by adjusting the allowance for impairment account. If a future write-off is later recovered, the recovery is recognized in the consolidated statements of comprehensive income.

 Available-For-Sale (AFS) financial assets

In the case of equity investments classified as an AFS financial asset, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost.

Where there is objective evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the consolidated statements of comprehensive income - is reclassified from stockholders’ equity to comprehensive income. Impairment losses on equity investments are not reversed through the consolidated statements of comprehensive income; increases in the equity investments’ fair value after impairment are recognized in stockholders’ equity.

vii. Derecognition of financial assets and liabilities Financial Assets

A financial asset (or where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when: (1) the rights to receive cash flows from the asset have expired, or (2) the Company and Subsidiaries have transferred their rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Company and Subsidiaries have transferred substantially all the risks and rewards of the asset, or (b) the Company and Subsidiaries have neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset. Financial Liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a extinguishment of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated statements of comprehensive income.

x. Adoption of other revised accounting standards

Other than the revised accounting standards previously mentioned above, the Company and Subsidiaries also adopted the following revised accounting standards effective 1 January 2011, which were considered relevant to the consolidated financial statements but did not have significant impact except for the related disclosures:

 PSAK 2 (Revised 2009), “Statements of Cash Flows”  PSAK 8 (Revised 2010), “Events after the Reporting Period”

 PSAK 25 (Revised 2009), “Accounting Policies, Changes in Accounting Estimates and Errors”  PSAK 57 (Revised 2009), “Provisions, Contingent Liabilities and Contingent Assets”.

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 Company’s and Subsidiaries’ 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:

 Determination of functional currency

The functional currency of the Company and each of the Subsidiaries is the currency of the primary economic environment in which each entity operates. It is the currency that mainly influences the revenues and related cost of sales and direct costs.

 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), revenue is recognized using the percentage-of-completion method as construction progresses. 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.

 Business combinations

As part of its business strategy, the Company acquires subsidiaries that own real estate. At the time of acquisition, the Company considers whether the acquisition represents the acquisition of a business. The Company accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property. More specifically, consideration is made of the extent to which significant processes are acquired and, in particular, the extent of ancillary services provided by the subsidiary (e.g., maintenance, cleaning, security, bookkeeping, hotel services, etc.). The significance of any process is judged with reference to the guidance in IAS 40 on ancillary services.

When the acquisition of a subsidiary does not represent a business acquisition, it is accounted for as an acquisition of a group of assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based upon their relative fair values, and no goodwill or deferred tax is recognized.

 Classification of property

The Company and Subsidiaries determine whether an acquired property is classified as investment property or property inventory :

− Investment property comprises land and buildings (principally offices, commercial warehouse and retail property) which are not occupied substantially for use by, or in the operations of, the Company and Subsidiaries, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation.

− Property inventory comprises property that is held for sale in the ordinary course of business. Principally, this is residential property that the Company and Subsidiaries develop and intend to sell before or on completion of construction.

 Operating lease contracts – the Company or Subsidiary as lessor

The Company and Subsidiaries have entered into commercial property leases on their investment property portfolio. The Company and Subsidiaries have determined, based on an evaluation of the terms and conditions of the arrangements, that they retain all the significant risks and rewards of

e. On 30 June 2010, PT Summerville Property Management (SPM) entered into a property management agreement with Perhimpunan Penghuni Rumah Susun Hunian The Summit Kelapa Gading (PP Summit), whereby PP Summit appointed SPM to provide property management services for The Summit Apartment. PP Summit agreed to pay monthly fee as compensation, amounting to Rp25,000. This agreement is valid for 3 years from July 2010 to June 2013.

f. On 16 February 2010, the Company and GO entered into steel price agreements with PT Jakarta Cakratunggal Steel Mills (CS) for steel purchases amounting to Rp60,392,400 for the Company and Rp11,800,000 for GO. As of 31 December 2011, the Company and GO have bought and used all the steel agreed in these agreements for their existing projects. No balance is outstanding from these transactions as of 31 December 2011.

g. On 12 January 2010, the Company entered into building construction and marketing agreement with PT Permata Cahaya Indah (PCI), whereby the Company agreed to deliver monitoring and marketing services for office buildings belonging to PCI located in Kelapa Gading. For these services, PCI agreed to pay the Company an annual management fee amounting to Rp12,000,000.

h. On 2 November 2009, SH, a Subsidiary, entered into a Tradename and Trademark License Agreement with Harris International Hotels wherein SH is authorized to use the name “Harris” for “Harris Hotel Kelapa Gading”. SH agreed to pay royalties as compensation in accordance with the terms of the agreement at rates up to a maximum of 1.50% of total revenues. This agreement is valid for 10 years. The hotel commenced operations from 2 May 2010..

i. On 2 November 2009, the Company and SH entered into a Hotel Management Consulting Agreement with PT Tauzia International Management (Tauzia) wherein Tauzia is engaged as sole and exclusive advisor and consultant to supervise, direct, manage and control the operations of Harris Hotel Kelapa Gading. Tauzia is entitled to receive consultation fees as compensation computed at rates up to a maximum of 8% of gross operating profit as defined in the agreement. This agreement is valid for 10 years. The hotel commenced operations from 2 May 2010.

j. On 30 July 2009, SCK entered into a joint operation, known as KSO Summarecon Lakeview (KSO-SL), with TGS and LK. Under the terms of the agreement, the parties agreed to collaborate to develop an area known as East Business Unit Land belonging to TGS. KSO-SL has been appointed as the sole party to develop, sell and manage the East Business Unit Land for a period of 10 years until 29 April 2019. The parties agreed that the net profits from the joint operation shall be distributed to the parties in the following manner: TGS at 10%, LK at 45% and SCK at 45%. However, loss from the KSO operations, if any, shall be borne by SCK and LK in their respective proportions. Subsequently, on 17 March 2010, the parties agreed to change the percentages of profit sharing to become: TGS at 5%, LK at 40% and SCK at 55%.

k. In May 2007, the Company entered into a Hotel Technical Assistance Agreement with Tauzia wherein Tauzia will provide technical assistance for the construction of a hotel at a fee as agreed in the agreement. This agreement is valid until the opening and commencement of operations of the hotel.

l. The Company, BMS, GO and SCK entered into agreements with each of BCA, CIMB, OCBC, BII, Permata, Panin, Mandiri, Danamon, BNI and UOB whereby these banks agreed to provide housing and apartment loans to the customers of the Company, BMS, GO and KSO Summarecon Serpong. The Company, BMS, GO and SCK are required to provide collateral in the form of corporate guarantees and time deposits to temporarily secure the customers’ loans until such time the Company, BMS, GO and KSO Summarecon Serpong submit to the respective banks the related certificates of ownership of the land and buildings purchased by the customers (Note 14).

SCK entered into the above agreements on behalf of KSO Summarecon Serpong (a joint operation) (Note 36m).

m. Based on notarial deed No. 39 dated 21 July 2004 of Dewi Himijati Tandika, S.H., SCK entered into a joint operation known as KSO Summarecon Serpong under an agreement with PT Jakartabaru Cosmopolitan (JBC). Under the agreement, both parties agreed to collaborate in developing 400 hectares of land belonging to JBC in Perumahan Gading Serpong Permai, Tangerang. KSO Summarecon Serpong has been appointed as the only party which will plan, release, expand and operate the land, while SCK has been appointed to handle the management of the joint operation and identify financing sources for its operations. Income or loss from operations will be distributed between both parties at 70% for SCK and 30% for JBC. This agreement is valid for a period of 10 years until 20 July 2014.

The obligations of JBC in relation to this joint operation include the following, among others:

 Provide land to be managed and developed by the parties in KSO Summarecon Serpong

 Take responsibility for solving disputes arising from the land development, if any

 Provide the labor requirements of KSO Summarecon Serpong

 Permit SCK to utilize the location license owned by JBC and acquire land ownership over the undeveloped land

 Allow SCK to utilize infrastructure located on the land

 Assist SCK in obtaining the rights over the remaining land by signing the release of land ownership agreements with the individual land owners.

The obligations of SCK in relation to this joint operation include the following, among others:

 Provide financing for land development

 Provide the labor requirements of KSO Summarecon Serpong

 Acquire land ownership covered by the project.

The details of assets, liabilities, revenues and expenses of KSO Summarecon Serpong which were proportionally consolidated to SCK’s financial statements (representing 70% sharing ratio) are as follows:

Total Before Elimination

2012 2011

Assets 879,373,714 647,254,484

Liabilities 879,373,714 647,254,484

Revenues 170,948,770 53,804,164

Expenses (28,830,197) (36,480,499)

37. DERIVATIVE INSTRUMENTS

The Company is exposed to market risks, primarily changes in currency exchange rates and interest rate, and uses derivative instruments to hedge the risks in such exposures in connection with its risk management activities, The Company does not hold or issue derivative instruments for trading purposes. The Company entered into a Cross Currency Interest Rate Swap (CCIRS) transaction with PT Bank ANZ Indonesia to hedge the Company’s US$5 million debt to Resona (Note 15), Under the CCIRS, the Company purchased U,S, dollars with a principal amount of US$5 million from PT Bank ANZ Indonesia on 31 August 2006 for a fixed exchange rate of Rp9,085 to US$1 with a maturity date on 30 June 2011. The Company agreed to pay the rupiah principal amortization amount at the fixed exchange rate according to the scheduled dates, and simultaneously receive the fixed U,S, dollar principal amortization amount, PT Bank ANZ Indonesia agreed to pay the Company monthly interest in U,S,dollars computed at the interest

rate of 1 month COLF + 2,30% per annum in 2012 and 2011, in exchange for the Company paying monthly interest to PT Bank ANZ Indonesia in rupiah computed at the rate of 15,35% per annum on the outstanding principal amount. The interest payment period and U,S, dollar interest receipts matched the interest payment period and U,S, dollar interest payment of the Resona loan. During the year 2012 there was no payment of principal dollars by the company. Whereas during the year 2011, the rupiah principal paid by the Company amounted to Rp5,344,124 and simultaneously received the U,S dollar principal amounting to US$ $588,236. The Company recognized the net liability on the CCIRS contract at market value of Rp201,204, which is presented as “Derivative Liability” in the consolidated statement of financial position as of 31 December 2010.The derivative liability was fully paid in 2011.

The CCIRS instrument was not designated as a hedge for accounting purposes and accordingly, the change in the fair value of the CCIRS was recorded as a charge to “Gain (Loss) on Derivative Instrument”, which is presented in the consolidated statements of comprehensive income.

In 2010, the Company was required to provide collateral in the form of time deposits for the CCIRS transaction (Note 14).

38. LITIGATIONS

The Company and Subsidiaries are involved in several lawsuits as follows:

a. Gading Orchard (defendant) vs, Gloria Tannos (plaintiff) in relation to booking fee, On 17 December 2009, the Central Jakarta District Court approved some of the plaintiff’s claim, However, on 29 December 2009, the defendant filed an appeal to the Jakarta High Court. As of 30 June 2012, no decision has been made by the Jakarta High Court.

b. CDA (defendant) and the Company (co-defendant I) vs. Hj. Lisa dkk (plaintiff) in relation to the transfer of shares belonging to the plaintiff to H. Sukardi Endang Taruna, S.H. (formerly a President Director of CDA). On 14 July 2010, the East Jakarta District Court decided to refuse the claim which has had permanent legal force because the plantiff has not filed an appeal,

c. CDA (defendant) vs. Abdul Thalib Bin Haji Abubakar dkk (plaintiff). In this case, the plaintiff claimed from 18 parties (including CDA) 139,250 square meters of land. The management is of the opinion that the plaintiff’s claim is not based on law because the acquisition of the above land has followed the relevant rules and regulations. On 11 May 2010, the East Jakarta District Court decided to refuse the claim since the plaintiff could not prove his claim. However, on 30 December 2010, the plantiff filed an appeal to the Jakarta High Court. On 23 August 2011, the Jakarta High Court affirmed the East Jakarta District Court’s decision. Since the plaintiff has not filed an appeal to the Supreme Court, the East Jakarta District Court’s decision has permanent legal force.

d. Kiswantara Partadiredja (defendant) and BMS (co-defendant II) vs. Emma Hernasari (plaintiff) in relation to a dispute between the plaintiff and defendant relating to a sale and purchase of a property at Gading Park View. On 4 February 2009, the North Jakarta District Court approved the plaintiff’s claim. On 29 April 2009, the defendants filed an appeal to the Jakarta High Court. On 10 November 2010, the Jakarta High Court rejected the defendant’s appeal and commanded BMS to sign a sale and purchase agreement. Then, defendant filed an appeal to the Supreme Court through the North Jakarta High Court. On 28 January 2011, the North Jakarta High Court refused to continue the defendants’ appeal to the Supreme Court, since the appeal did not fulfill formal requirements. e. The Company (defendant) and Jakarta Provincial Government through the Mayor of North Jakarta

(co-defendant I) vs. E. Atika dkk (plaintiff) concerning a claim over approximately 20,283 square meters of land located in Pegangsaan Dua. On 16 March 2011, the North Jakarta District Court decided to refuse the plaintiff’s claim. However, on 30 March 2011, the plaintiff filed an appeal to the Jakarta High Court. As of 30 June 2012, no decision has been made by the Jakarta High Court. f. The Company (defendant) and the Government of the Republic of Indonesia through the Minister of

Internal Affairs, Governor of DKI Jakarta and Supervision and Control of Agency Heads of Jakarta and North Jakarta (defendant II) vs. Susanto Arfiana Oen (plaintiff). In this case, the plaintiff claimed

44 hectares of land of Grand Orchard, located in Pegangsaan Dua. On 24 November 2011, the East Jakarta District Court decided to refuse the plaintiff’s claim. However, on 21 December 2011, the plaintiff filed an appeal to the Jakarta High Court. As of 30 June 2012, no decision has been made by the Jakarta High Court.

g. The Company (defendant) vs. Iin Parwati (plaintiff) in relation to fence installation above the plaintiff’s ground. On 28 November 2011, the Tangerang District Court decided to refuse the plaintiff’s claim. However, on 30 November 2011, the plaintiff filed an appeal to the Banten High Court. As of 30 June 2012, no decision has been made by the Banten High Court.

h. The Company (defendant) and PT Persada Graha Permai (co-defendant) vs. R. Bey Ubaydillah (plaintiff) concerning a claim over approximately 53,120 square meters of land located in Pegangsaan Dua. As of 30 June 2012, no decision has been made by the East Jakarta district Court.

i. Ministry of Law and Human Rights (defendant) and CDA (defendent intervension) vs. PT Citraputra Lestari (plaintiff) concerning legality of the Ministry of Law and Human Right’s decision about the amendment of the articles of association of CDA and the receipt of report on the amendment. On 20 December 2010, the Jakarta State Administrative Court decided to refuse the plaintiff’s claim. However, on 14 September 2011, the plaintiff filed an appeal to the Jakarta High State Administrative Court, which affirmed the Jakarta State Administrative Court’s decision. On 23 November 2011, the plaintiff filed an appeal to the Supreme Court. As of 30 June 2012, no decision has been made by the Supreme Court.

The Company’s management believes that the above litigations will not have a material effect and will not influence the going concern status of the Company and that these can be settled in accordance with existing laws.

39. RECENT DEVELOPMENTS AFFECTING ACCOUNTING STANDARDS AND INTERPRETATIONS

The following are several accounting standards published by the Indonesian Financial Accounting Standards Board (DSAK) that are considered relevant to the financial reporting of the Company and Subsidiaries but will be effective only starting on 1 January 2012 :

a. PSAK 10 (Revised 2010), "The Effects of Changes in Foreign Exchange Rates"

This revised PSAK prescribes how to include foreign currency transactions and foreign operations in the financial statements of an entity and translate financial statements into a presentation currency. b. PSAK 13 (2011), "Investment Property"

This PSAK shall be applied in the recognition, measurement and disclosure of investment property, including the measurement in a lessee's financial statements of investment property interests held under a lease accounted for as a finance lease and to the measurement in a lessor's financial statements of investment property provided to a lessee under an operating lease

c. PSAK 16 (2011), "Property, Plant and Equipment"

This PSAK prescribes the accounting treatment for property, plant and equipment so that users of the financial statements can discern information about an entity's investment in its property, plant and equipment and the changes in such investment. The principal issues in accounting for property, plant and equipment are the recognition of the assets, the determination of their carrying amounts and the depreciation charges and impairment losses to be recognized in relation to them.

d. PSAK 18 (Revised 2010), "Accounting and Reporting by Retirement Benefit Plans"

This revised PSAK is concerned with the determination of the cost of retirement benefits in the financial statements of employers having plans. This Standard complements PSAK 24 (Revised

2010).

e. PSAK 24 (Revised 2010), "Employee Benefits"

This revised PSAK establishes the accounting and disclosures for employee benefits of an entity and requires the recognition of liability and expense when an employee has provided service and the entity consumes economic benefit arising from the service.

f. PSAK 26 (2011), "Borrowing Costs"

This PSAK provides that borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognized as an expense.

g. PSAK 46 (Revised 2010), "Accounting for Income Taxes"

This revised PSAK prescribes the accounting treatment for income taxes to account for the current and future tax consequences of the future recovery/(settlement) of the carrying amount of assets/(liabilities) that are recognized in the statement of financial position; and transactions and other events of the current period that are recognized in the financial statements.

h. PSAK 50 (Revised 2010), "Financial Instruments: Presentation"

This revised PSAK establishes the principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and financial liabilities.

i. PSAK 55 (2011), "Financial Instruments: Recognition and Measurement"

This PSAK establishes principles for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The requirements for presenting information about financial instruments are prescribed in PSAK 50 (Revised 2010), "Financial Instruments: Presentation". The requirements for disclosing information about financial instruments are in PSAK 60, "Financial Instruments: Disclosures".

j. PSAK 56 (Revised 2011), "Earnings per Share"

This revised PSAK prescribes principles for the determination and presentation of earnings per share, so as to improve performance comparisons between different entities in the same period and between different reporting periods for the same entity.

k. PSAK 60, "Financial Instruments: Disclosures"

This PSAK requires disclosures in financial statements that enable users to evaluate the significance of financial instruments for financial position and performance; and the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the end of the reporting period, and how the entity manages those risks.

l. ISAK 15, "PSAK 24 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction"

This interpretation provides guidance on how to assess the limit on the amount of surplus in a defined scheme that can be recognized as an asset under PSAK 24 (Revised 2010), "Employee Benefits

m. ISAK 20, "Income Taxes - Changes in the Tax Status of an Entity or its Shareholders"

This interpretation prescribes how an entity should account for the current and deferred tax consequences of a change in its tax status or that of its shareholders.

n. PPSAK 7, "Revocation of PSAK 44", "Accounting for Real Estate Development Activities"

industry, even if real estate is not the main industry.

The Company and Subsidiaries are presently evaluating and have not yet determined the effects of these revised and new standards and interpretations on the consolidated financial statements.

40. ECONOMIC CONDITIONS

The operations of the Company and Subsidiaries may be affected by the weakening global financial condition if it continues and sustains in years to come. Economic improvements and sustained recovery are dependent upon several factors, such as political situation, national stability, fiscal and monetary actions being undertaken by the Government and others, actions that are beyond the control of the Company and Subsidiaries.

41. COMPLETION OF THE CONSOLIDATED FINANCIAL STATEMENTS

The management of the Company and Subsidiaries is responsible for the preparation of the consolidated financial statements that were completed and authorized to be issued on 31 July 2012.