Indosat Tbk and subsidiaries
Interim consolidated financial statements
with independent accountants’ review report
as of September 30, 2011 and for the
nine months then ended
with comparative figures for 2010
and as of December 31, 2010
and January 1, 2010/December 31, 2009
These interim consolidated financial statements are originally issued in Indonesian Language.
PT INDOSAT Tbk AND SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
WITH INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
AS OF SEPTEMBER 30, 2011 AND FOR THE NINE MONTHS THEN ENDED (Unaudited)
WITH COMPARATIVE FIGURES FOR 2010 AND AS OF DECEMBER 31, 2010
AND JANUARY 1, 2010/DECEMBER 31, 2009 (Audited)
Table of Contents
Page
Independent Accountants’ Review Report
Interim Consolidated Statements of Financial Position ……………………………………………….
1 - 4
Interim Consolidated Statements of Comprehensive Income ………………………………………..
5 - 6
Interim Consolidated Statements of Changes in Equity ………………………………………………
7
Interim Consolidated Statements of Cash Flows
………………………………………………………
8 - 9
Notes to the Interim Consolidated Financial Statements
………………………………………………
10 - 117
***************************
This report is originally issued in the Indonesian language.
Independent Accountants’ Review Report
Report No. RPC-339/PSS/2011/DAU
The Stockholders and the Boards of Commissioners and Directors
PT Indosat Tbk
We have reviewed the interim consolidated statement of financial position of PT Indosat Tbk (the “Company”) and subsidiaries as of September 30, 2011, and the related interim consolidated statements of comprehensive income, changes in equity and cash flows for the nine months then ended. These interim consolidated financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards established by the Indonesian Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards established by the Indonesian Institute of Certified Public Accountants, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any indications of material modifications that should be made to the interim consolidated financial statements as of September 30, 2011 and for the nine months then ended referred to above in order for them to be in conformity with Indonesian Financial Accounting Standards.
Effective January 1, 2011, the Company and subsidiaries adopted certain revised Statements of Financial Accounting Standards, which were applied on a prospective or retrospective basis, as disclosed in Note 2 to the interim consolidated financial statements. Therefore, the consolidated statements of financial position as of December 31, 2010 and January 1, 2010/December 31, 2009 were restated due to reclassification of certain accounts. The restated consolidated statements of financial position as of December 31, 2010 and January 1, 2010/December 31, 2009 have been audited by us in accordance with auditing standards established by the Indonesian Institute of Certified Public Accountants, and we expressed an unqualified opinion on those statements.
We have not audited or reviewed the interim consolidated statements of comprehensive income, changes in equity and cash flows of the Company and subsidiaries for the nine months ended September 30, 2010, which are presented for comparative purposes, and accordingly, we do not express an opinion or any other form of assurance on them.
Purwantono, Suherman & Surja
Drs. Hari Purwantono
Public Accountant License No. 98.1.0065
October 25, 2011
The accompanying consolidated financial statements are not intended to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Indonesia. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in Indonesia.
See Independent Accountants’ Review Report on review of interim consolidated financial statements.
The accompanying notes form an integral part of these interim consolidated financial statements.
1
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
September 30, 2011 (Unaudited)
With Comparative Figures for December 31, 2010 and
January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah, except share data)
September, 30
January 1, 2010/
Notes
2011
December 31, 2010
December 31, 2009
ASSETS
CURRENT ASSETS
Cash and cash equivalents
2d,2n,2s,
4,21,30,37
1,809,127
2,075,270
2,835,999
Accounts receivable
2n
Trade
5,21,37
Related parties - net of
allowance for impairment
of Rp62,192 as of
September 30, 2011, Rp47,640
as of December 31, 2010
and Rp57,538 as of
January 1, 2010
2s,30
213,321
222,506
125,912
Third parties - net of
allowance for impairment
of Rp448,622 as of
September 30, 2011, Rp448,470
as of December 31, 2010
and Rp404,272 as of
January 1, 2010
1,231,379
1,325,920
1,259,213
Others - net of allowance
for impairment of
Rp15,971 as of
September 30, 2011,
Rp15,281 as of
December 31, 2010
and Rp16,544 as of
January 1, 2010
10,864
10,031
564,859
Inventories - net of allowance
for obsolescence of Rp8,903
as of September 30, 2011,
Rp13,961 as of
December 31, 2010 and
Rp10,769 as of
January 1, 2010
2e
90,392
105,885
112,260
Derivative assets
2n,20,21,37
231,468
69,334
224,743
Advances
32g
59,510
67,273
35,173
Prepaid taxes
2p,6,16
812,408
701,560
818,326
Prepaid expenses
2f,2j,2m,2s,
29,30
732,370
1,527,254
1,125,091
Other current financial assets - net
2d,2n,2s,7,
21,30,37
35,351
53,119
35,173
Other current assets
759
702
2,878
Total Current Assets
5,226,949
6,158,854
7,139,627
See Independent Accountants’ Review Report on review of interim consolidated financial statements.
The accompanying notes form an integral part of these interim consolidated financial statements.
2
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)
September 30, 2011 (Unaudited)
With Comparative Figures for December 31, 2010 and
January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah, except share data)
September 30,
January 1, 2010/
Notes
2011
December 31, 2010
December 31, 2009
NON-CURRENT ASSETS
Due from related parties - net of
allowance for impairment
of Rp15 as of September 30, 2011,
Rp646 as of December 31, 2010
and Rp1,182 as of
January 1, 2010
2n,2s,21,30,37
10,124
8,421
7,215
Deferred tax assets - net
2p,16
102,221
95,018
85,812
Property and equipment - net
2h,2i,2l,8,
18,26
42,242,435
43,571,010
44,428,807
Goodwill and other
intangible assets - net
2c,2i,9
1,368,315
1,374,060
1,580,080
Long-term prepaid rentals -
net of current portion
2f,2s,10,30
752,966
750,472
735,185
Long-term prepaid licenses -
net of current portion
2f,2j,2s,30
348,328
397,708
463,549
Long-term advances
2s,11,30,32g
248,416
216,643
294,391
Long-term prepaid pension - net
of current portion
2s,2m,29,30
119,375
111,344
147,380
Long-term receivables
21,584
45,911
50,767
Other non-current financial
assets - net
2d,2n,2s,12,
21,30,32g,
32i,37
91,680
80,405
102,734
Other non-current assets - net
6,621
8,341
5,940
Total Non-current Assets
45,312,065
46,659,333
47,901,860
TOTAL ASSETS
50,539,014
52,818,187
55,041,487
See Independent Accountants’ Review Report on review of interim consolidated financial statements.
The accompanying notes form an integral part of these interim consolidated financial statements.
3
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)
September 30, 2011 (Unaudited)
With Comparative Figures for December 31, 2010 and
January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah, except share data)
September 30,
January 1, 2010/
Notes
2011
December 31, 2010
December 31, 2009
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loan
2n,2s,14,21,
30,37
298,516
-
-
Accounts payable - trade
2n,2s,21,
30,37
Related parties
32,463
22,260
38,670
Third parties
521,162
623,245
498,806
Procurement payable
2n,2s,15,
21,30,37
3,378,681
3,644,467
5,289,782
Taxes payable
2p,16
78,474
169,445
161,820
Accrued expenses
2n,2s,17,
21,30,37
1,506,372
1,710,885
1,525,561
Unearned income
2k,32f,32g
1,162,748
1,143,852
941,223
Deposits from customers
2n,21,37
28,078
50,279
22,463
Derivative liabilities
2n,20,21,
37
183,136
215,403
200,202
Current maturities of:
Loans payable
2n,2s,18,
21,30,37
3,901,985
3,184,147
1,440,259
Bonds payable
2n,19,
21,37
41,989
1,098,131
2,840,662
Other current financial
liabilities
2n,2s,21,30,37
43,851
23,127
43,721
Other current liabilities
2s,30,37
66,916
61,612
68,065
Total Current Liabilities
11,244,371
11,946,853
13,071,234
NON-CURRENT LIABILITIES
Due to related parties
2n,2s,21,
30,37
13,415
22,099
13,764
Deferred tax liabilities - net
2p,16
2,097,587
1,772,337
1,535,202
Loans payable - net of current
maturities
2n,2s,18,
21,30,37
5,425,895
7,666,804
12,721,308
Bonds payable - net of current
maturities
2n,19,
21,37
11,975,009
12,114,104
8,472,175
Employee benefit obligations -
net of current portion
2m,22
733,807
872,407
825,714
Other non-current liabilities
2s,30,
32g,37
108,489
187,097
113,807
Total Non-current Liabilities
20,354,202
22,634,848
23,681,970
TOTAL LIABILITIES
31,598,573
34,581,701
36,753,204
See Independent Accountants’ Review Report on review of interim consolidated financial statements.
The accompanying notes form an integral part of these interim consolidated financial statements.
4
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)
September 30, 2011 (Unaudited)
With Comparative Figures for December 31, 2010 and
January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah, except share data)
September 30,
January 1, 2010/
Notes
2011
December 31, 2010
December 31, 2009
EQUITY
EQUITY ATTRIBUTABLE TO
OWNERS’ OF THE COMPANY
Capital stock - Rp100 par value
per A share and B share
Authorized - 1 A share and
19,999,999,999 B shares
Issued and fully paid - 1 A share
and 5,433,933,499 B shares
23
543,393
543,393
543,393
Premium on capital stock
1,546,587
1,546,587
1,546,587
Retained earnings
Appropriated
134,446
134,446
119,464
Unappropriated
15,893,271
15,224,843
15,341,773
Difference in transactions of
equity changes in associated
companies/subsidiaries
2g
404,104
404,104
404,104
Difference in foreign currency
translation
2b
(1,514
)
(2,727
)
2,369
Total Equity Attributable to:
Owners of the Company
18,520,287
17,850,646
17,957,690
Non-controlling interests
2b,40
420,154
385,840
330,593
TOTAL EQUITY
18,940,441
18,236,486
18,288,283
TOTAL LIABILITIES AND EQUITY
50,539,014
52,818,187
55,041,487
See Independent Accountants’ Review Report on review of interim consolidated financial statements.
The accompanying notes form an integral part of these interim consolidated financial statements.
5
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Nine Months Ended September 30, 2011 (Unaudited)
With Comparative Figures for 2010 (Unaudited)
(Expressed in millions of rupiah, except share data)
Notes
2011
2010
OPERATING REVENUES
2k,2s,24,30,
34,35,36
Cellular
40
12,587,109
12,015,865
Multimedia, Data
Communication,
Internet (“MIDI”)
32c
1,837,070
1,810,876
Fixed telecommunications
40
936,331
1,016,338
Total Operating Revenues
15,360,510
14,843,079
OPERATING EXPENSES
2s,30
Cost of services
2k,25,32h,
32m,34,35
5,476,297
5,291,105
Depreciation and amortization
2h,8,9
4,841,355
4,565,620
Personnel
2l,2m,26,
29
1,517,462
1,138,464
Marketing
2k
765,687
821,914
General and administration
27,40
452,992
484,306
Total Operating Expenses
13,053,793
12,301,409
OPERATING INCOME
2,306,717
2,541,670
OTHER INCOME (EXPENSES)
Gain on foreign exchange - net
2n,2o,4
395,687
589,156
Gain (loss) on change in fair value
of derivatives - net
2n,20,37
89,998
(378,431)
Interest income
2n,2s,30
61,634
113,166
Financing cost
2s,18,19,
28,30
(1,358,028
)
(1,745,054)
Amortization of goodwill
2c,9
-
(169,880)
Others - net
6,8,16,40
(39,445
)
(77,085
)
Other Expenses - Net
(850,154
)
(1,668,128
)
PROFIT BEFORE INCOME TAX
1,456,563
873,542
INCOME TAX EXPENSE
2p,16
Current
(82,761
)
(99,859)
Deferred
(317,643
)
(193,320
)
Total Income Tax Expense
(400,404
)
(293,179)
PROFIT FOR THE PERIOD
1,056,159
580,363
See Independent Accountants’ Review Report on review of interim consolidated financial statements.
The accompanying notes form an integral part of these interim consolidated financial statements.
6
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (continued)
Nine Months Ended September 30, 2011 (Unaudited)
With Comparative Figures for 2010 (Unaudited)
(Expressed in millions of rupiah, except share data)
Notes
2011
2010
PROFIT FOR THE PERIOD
ATTRIBUTABLE TO:
Owners of the Company
992,019
530,914
Non-controlling interests
2b,40
64,140
49,449
Total
1,056,159
580,363
BASIC EARNINGS PER SHARE
ATTRIBUTABLE TO OWNERS
OF THE COMPANY
2r
182.56
97.70
BASIC EARNINGS PER ADS
(50 SHARES PER ADS)
ATTRIBUTABLE TO OWNERS
OF THE COMPANY
2r
9,128.00
4,885.17
PROFIT FOR THE PERIOD
1,056,159
580,363
OTHER COMPREHENSIVE INCOME
Difference in foreign currency translation
2b
1,617
(6,171
)
Income tax effect
(404
)
1,543
Difference in foreign currency
translation - net of tax
1,213
(4,628)
NET COMPREHENSIVE INCOME
1,057,372
575,735
OTHER COMPREHENSIVE INCOME -
NET OF TAX ATTRIBUTABLE TO:
Owners of the Company
1,213
(4,628
)
Non-controlling interests
2b
-
-
Total
1,213
(4,628
)
NET COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the Company
993,232
526,286
Non-controlling interests
64,140
49,449
Total
1,057,372
575,735
See Independent Accountants’ Review Report on review of interim consolidated financial statements.
The accompanying notes form an integral part of these interim consolidated financial statements.
7
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Nine Months Ended September 30, 2011 (Unaudited)
With Comparative Figures for 2010 (Unaudited)
(Expressed in millions of rupiah)
|
|
|
|
| Equity Attributable to Owners of the Company |
|
|
|
| ||||||||||||
Description |
| Notes |
| Capital Stock - Issued and Fully Paid |
| Premium of Capital Stock |
| Retained Earnings |
| Difference in Transactions of Equity Changes in Associated Companies/Subsidiaries |
| Difference in Foreign Currency Translation |
| Total |
| Non-controlling Interests |
| Total Equity | |||
|
|
|
| Appropriated |
| Unappropriated |
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2010 |
|
|
| 543,393 |
| 1,546,587 |
| 119,464 |
| 15,341,773 |
| 404,104 |
| 2,369 |
| 17,957,690 |
| 330,593 |
| 18,288,283 | |
Difference in foreign currency translation arising from the translation of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| the financial statements of Indosat Finance Company B.V., Indosat International Finance Company B.V. and Indosat Palapa Company B.V. from euro, and Indosat Singapore Pte. Ltd. from U.S.dollar to rupiah - net of applicable income tax benefit of Rp726, Rp336, Rp371 and Rp110, respectively |
| 2b |
| - |
| - |
| - |
| - |
| - |
| (4,628) |
| (4,628) |
| - |
| (4,628) |
Resolution during the Annual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Stockholders' General Meeting on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 22, 2010 |
| 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Declaration of cash dividend |
|
|
| - |
| - |
| - |
| (749,122) |
| - |
| - |
| (749,122) |
| - |
| (749,122) |
| Appropriation for reserve fund |
|
|
| - |
| - |
| 14,982 |
| (14,982) |
| - |
| - |
| - |
| - |
| - |
Profit for the period |
|
|
| - |
| - |
| - |
| 530,914 |
| - |
| - |
| 530,914 |
| 49,449 |
| 580,363 | |
Changes in non-controlling interests |
|
|
| - |
| - |
| - |
| - |
| - |
| - |
| - |
| (21,437) |
| (21,437) | |
Balance as of September 30, 2010 |
|
|
| 543,393 |
| 1,546,587 |
| 134,446 |
| 15,108,583 |
| 404,104 |
| (2,259) |
| 17,734,854 |
| 358,605 |
| 18,093,459 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2011 |
|
|
| 543,393 |
| 1,546,587 |
| 134,446 |
| 15,224,843 |
| 404,104 |
| (2,727) |
| 17,850,646 |
| 385,840 |
| 18,236,486 | |
Difference in foreign currency translation arising from the translation of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| the financial statements of Indosat Finance Company B.V., Indosat International Finance Company B.V. and Indosat Palapa Company B.V. from euro, and Indosat Singapore Pte. Ltd. from U.S.dollar to rupiah - net of applicable income tax benefit (expense) of Rp14, Rp3, (Rp62) and (Rp359), respectively |
| 2b |
| - |
| - |
| - |
| - |
| - |
| 1,213 |
| 1,213 |
| - |
| 1,213 |
Resolution during the Annual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Stockholders' General Meeting on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 24, 2011 |
| 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Declaration of cash dividend |
|
|
| - |
| - |
| - |
| (323,591) |
| - |
| - |
| (323,591) |
| - |
| (323,591) |
Profit for the period |
|
|
| - |
| - |
| - |
| 992,019 |
| - |
| - |
| 992,019 |
| 64,140 |
| 1,056,159 | |
Changes in non-controlling interests |
|
|
| - |
| - |
| - |
| - |
| - |
| - |
| �� - |
| (29,826) |
| (29,826) | |
Balance as of September 30, 2011 |
|
|
| 543,393 |
| 1,546,587 |
| 134,446 |
| 15,893,271 |
| 404,104 |
| (1,514) |
| 18,520,287 |
| 420,154 |
| 18,940,441 | |
8
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2011 (Unaudited)
With Comparative Figures for 2010 (Unaudited)
(Expressed in millions of rupiah)
Notes
2011
2010
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from:
Customers
15,425,571
14,697,282
Refunds of taxes
6
141,271
41,753
Interest income
62,228
111,700
Settlement from derivative contracts
20c,20h,20j
17,194
-
Cash paid to/for:
Suppliers and others
(5,661,746)
(6,141,031
)
Employees
(1,743,738)
(1,096,052
)
Financing cost
(1,445,934)
(1,829,875
)
Income taxes
(475,188)
(187,991
)
Interest rate swap contracts
20m-z
(75,475)
(95,165
)
Swap cost from cross currency
swap contracts
20b-k
(49,175
)
(65,231)
Net Cash Provided by Operating Activities
6,195,008
5,435,390
CASH FLOWS FROM INVESTING ACTIVITIES
Cash dividend received from other
long-term investment
12
7,004
19,281
Proceeds from sale of property
and equipment
8
2,998
1,940
Acquisitions of property and
equipment
(3,950,096)
(4,316,850)
Acquisitions of intangible assets
9
(5,438)
(22,798)
Proceeds of Palapa D-Satellite insurance claim
8
-
537,657
Net Cash Used in Investing Activities
(3,945,532)
(3,780,770)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term loans
18
1,022,900
1,092,059
Proceeds from short-term loan
14
300,000
-
Repayment of long-term loans
18
(2,402,126
)
(1,375,404
)
Repayment of bonds payable
19
(1,100,000
)
(3,080,816
)
Cash dividend paid by the Company
31
(323,591
)
(749,122)
Cash dividend paid by subsidiaries
to non-controlling interests
(9,140)
(8,285
)
Proceeds from bonds payable
-
5,851,300
Decrease in restricted cash and cash equivalents
-
19,645
Swap cost from cross currency swap contract
20a
-
(28,850)
Net Cash Provided by (Used in) Financing Activities
(2,511,957)
1,720,527
Net Foreign Exchange Differences from Cash
and Cash Equivalents
(3,662)
(26,081
)
NET INCREASE (DECREASE)IN CASH AND
CASH EQUIVALENTS
(266,143)
3,349,066
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
2,075,270
2,835,999
CASH AND CASH EQUIVALENTS
AT END OF PERIOD
4
1,809,127
6,185,065
See Independent Accountants’ Review Report on review of interim consolidated financial statements.
The accompanying notes form an integral part of these interim consolidated financial statements.
9
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Nine Months Ended September 30, 2011 (Unaudited)
With Comparative Figures for 2010 (Unaudited)
(Expressed in millions of rupiah)
Notes
2011
2010
DETAILS OF CASH AND CASH EQUIVALENTS:
4
Time deposits with original maturities of three months
or less and deposits on call
1,500,379
5,684,390
Cash on hand and in banks
308,748
500,675
Cash and cash equivalents as stated in the interim
consolidated statements of financial position
1,809,127
6,185,065
See Independent Accountants’ Review Report on review of interim consolidated financial statements.
The accompanying notes form an integral part of these interim consolidated financial statements.
10
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
1.
GENERAL
a.
Company’s Establishment
PT Indosat Tbk (“the Company”) was established in the Republic of Indonesia on November 10, 1967 within the framework of the Indonesian Foreign Investment Law No. 1 of 1967 based on the notarial deed No. 55 of Mohamad Said Tadjoedin, S.H. The deed of establishment was published in Supplement No. 24 of State Gazette No. 26 dated March 29, 1968 of the Republic of Indonesia. In 1980, the Company was sold by American Cable and Radio Corporation, an International Telephone & Telegraph subsidiary, to the Government of the Republic of Indonesia (“the Government”) and became a State-owned Company (Persero).
On February 7, 2003, the Company received the approval from the Capital Investment Coordinating Board (“BKPM”) in its letter No. 14/V/PMA/2003 for the change of its legal status from a State-owned Company (Persero) to a Foreign Capital Investment Company. Subsequently, on March 21, 2003, the Company received the approval from the Ministry of Justice and Human Rights of the Republic of Indonesia on the amendment of its Articles of Association to reflect the change in its legal status.
The Company’s Articles of Association has been amended from time to time. The latest amendment was covered by notarial deed No. 123 dated January 28, 2010 of Aulia Taufani, S.H., (as a substitute notary of Sutjipto, S.H.) as approved in the Stockholders’ Extraordinary General Meeting held on January 28, 2010, in order to comply with the Indonesian Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK) Rule No. IX.J.1 dated May 14, 2008 on the Principles of Articles of Association of Limited Liability Companies that Conduct Public Offering of Equity Securities and Public Companies and Rule No. IX.E.1 on Affiliate Transactions and Certain Conflict of Interests Transactions. The latest amendment of the Company’s Articles of Association has been approved by, and reported to, the Ministry of Law and Human Rights of the Republic of Indonesia based on its letters No. AHU-09555.AH.01.02 Year 2010 dated February 22, 2010 and No. AHU-AH.01.10-04964 dated February 25, 2010. The amendments relate to, among other matters, the changes in the Company’s purposes, objectives and business activities, appointment of acting President Director if the incumbent President Director is unavailable and definition of conflict of interests.
According to article 3 of its Articles of Association, the Company’s purposes and objectives are
to provide telecommunications networks, telecommunications services as well as information technology and/or convergence technology services by carrying out the following main business activities:
a.
To provide telecommunications networks, telecommunications services as well as information technology and/or convergence technology services, including but not limited to providing basic telephony services, multimedia services, internet telephony services, network access point service, internet services, mobile telecommunications networks and fixed telecommunications networks; and
b.
To engage in payment transactions and money transfer services through telecommunications networks as well as information technology and/or convergence technology.
The Company can provide supporting business activities in order to achieve the purposes and objectives, and to support its main businesses, as follows:
a.
To plan, to procure, to modify, to build, to provide, to develop, to operate, to lease, to rent, and to maintain infrastructures/facilities including resources to support the Company’s business in providing telecommunications networks, telecommunications services as well as information technology and/or convergence technology services;
11
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
b.
To conduct business and operating activities (including development, marketing and sales of telecommunications networks, telecommunications services as well as information technology and/or convergence technology services by the Company), including research, customer services, education and courses (both domestic and overseas); and
c.
To conduct other activities necessary to support and/or related to the provision of telecommunications networks, telecommunications services as well as information technology and/or convergence technology services including, but not limited to, electronic transactions and provision of hardware, software, content as well as telecommunications-managed services.
The Company started its commercial operations in 1969.
Based on Law No. 3 of 1989 on Telecommunications and pursuant to Government Regulation No. 77 of 1991, the Company had been re-confirmed as an Operating Body (“Badan Penyelenggara”) that provided international telecommunications services under the authority of the Government.
In 1999, the Government issued Law No. 36 on Telecommunications (“Telecommunications Law”) which took effect on September 8, 2000. Under the Telecommunications Law, telecommunications activities cover:
·
Telecommunications networks
·
Telecommunications services
·
Special telecommunications services
National state-owned companies, regional state-owned companies, privately-owned companies and cooperatives are allowed to provide telecommunications networks and services. Individuals, government institutions and legal entities, other than telecommunications networks and service providers, are allowed to render special telecommunications services.
The Telecommunications Law prohibits activities that result in monopolistic practices and unhealthy competition and expects to pave the way for market liberalization.
Based on the Telecommunications Law, the Company ceased as an Operating Body and has to obtain licenses from the Government for the Company to engage in the provision of specific telecommunications networks and services.
On August 14, 2000, the Government, through the Ministry of Communications (“MOC”), granted the Company an in-principle license as a nationwide Digital Communication System (“DCS”) 1800 telecommunications provider as compensation for the early termination effective August 1, 2003 of the exclusivity rights on international telecommunications services given to the Company prior to the granting of such license. On August 23, 2001, the Company obtained the operating license from the MOC. Subsequently, based on Decree No. KP.247 dated November 6, 2001 issued by the MOC, the operating license was transferred to the Company’s subsidiary, PT Indosat Multi Media Mobile (see “e” below).
On September 7, 2000, the Government, through the MOC, also granted the Company in-principle licenses for local and domestic long-distance telecommunications services as compensation for the termination of its exclusivity rights on international telecommunications services. On the other hand, PT Telekomunikasi Indonesia Tbk (“Telkom”) was granted an in-principle license for international telecommunications services as compensation for the early termination of Telkom’s rights on local and domestic long-distance telecommunications services.
12
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
Based on a letter dated August 1, 2002 from the MOC, the Company was granted an operating license for fixed local telecommunications network covering Jakarta and Surabaya. This operating license was converted to become a national license on April 17, 2003 based on Decree No. KP.130 Year 2003 of the MOC. The values of the above licenses granted to Telkom and the Company on the termination of their exclusive rights on local/domestic and international telecommunications services, respectively, have been determined by an independent appraiser.
The following are operating licenses obtained by the Company and PT Indosat Mega Media,
a subsidiary:
License No. | Date Issued | Issuing Body | Period of License | Description |
19/KEP/M.KOMINFO/ 02/2006 and 29/KEP/M.KOMINFO/ 03/2006 | February 14, 2006 and March 27, 2006 | Ministry of Communications and Information and Technology (“MOCIT”) | 10 years | Determination of the winner and operating license for IMT-2000 cellular network provider using 2.1 GHz radio frequency spectrum (a third generation [“3G”] mobile communications technology) for 1 block (2 x 5 Mhz) of frequency (*) |
102/KEP/M.KOMINFO/10/2006 | October 11, 2006 | MOCIT | Evaluated every year | Amended operating license for nationwide GSM cellular mobile network (including its basic telephony services and the rights and obligations of 3G services), which was amended by licence No.252/KEP/ M.KOMINFO/07/2011 |
181/KEP/M.KOMINFO/12/2006 | December 12, 2006 | MOCIT | - | Allocation of two nationwide frequency channels, i.e., channels 589 and 630 in the 800 MHz spectrum for Local Fixed Wireless Network Services with Limited Mobility |
01/DIRJEN/2008 | January 7, 2008 | Directorate General of Post and Telecommunications (“DGPT”) | Evaluated every 5 years | Operating license as internet service provider |
51/DIRJEN/2008 | January 9, 2008 | DGPT | Evaluated every 5 years | Operating license for internet interconnection services (Network Access Point/NAP), which replaces the previous license given to |
52/DIRJEN/2008 | January 9, 2008 | DGPT | Evaluated every 5 years | Operating license for telephony internet services which replaces the previous License No. 823/DIRJEN/2002 for Voice over Internet Protocol Service with national coverage that expired in 2007 |
237/KEP/M.KOMINFO/7/2009 | July 27, 2009 | MOCIT | 10 years | Operating license for “Packet Switched” local fixed telecommunications network using 2.3 GHz radio frequency spectrum of Broadband Wireless Access (BWA) (**) |
268/KEP/M.KOMINFO/9/2009 | September 1, 2009 | MOCIT | 10 years | Operating license for one additional block (2 x 5 Mhz) of 3G frequency (***) |
(*)
As one of the winners in the selection of IMT-2000 cellular providers, the Company was obliged to, among others, pay upfront fee of Rp320,000 (Note 2j) and radio frequency fee (Note 32j).
(**)
PT Indosat Mega Media was obliged to, among others, pay upfront fee of Rp18,408 (Note 2j) and radio frequency fee (Note 32j).
(***)
The Company was obliged to, among others, pay upfront fee of Rp320,000 (Note 2j) and radio frequency fee (Note 32j).
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
License No. | Date Issued | Issuing Body | Period of License | Description |
198/KEP/M.KOMINFO/05/2010 | May 27, 2010 | MOCIT | Evaluated every 5 years | Amended operating license for nationwide closed fixed communications network (e.g.,VSAT, frame relay, etc.), which replaces the previous license (No.KP.69/Thn 2004) given to the Company |
311/KEP/M.KOMINFO/8/2010 312/KEP/M.KOMINFO/8/2010 and 313/KEP/M.KOMINFO/8/2010 | August 24, 2010 | MOCIT | Evaluated every 5 years | Amended operating license for fixed network and basic telephony service which covers the provision of local, national long-distance, and international long-distance telephony services, which replaces the previous license (No. KP.203/Thn 2004) given to the Company |
On January 9, 2008, based on letter No. 10/14/DASP from Bank Indonesia (Central Bank), the Company obtained approval for“Indosat m-wallet” prepaid cards as a new means of making payments to certain merchants. The Company was also appointed as a special principal and technical acquirer for such prepaid cards. On November 19, 2009, the Company launched“Indosat m-wallet”to the public.
On March 17, 2008, MOCIT issued Ministerial Decree No. 02/PER/M.KOMINFO/2008 on the Guidelines of Construction and Utilization of Sharing Telecommunications Towers. Based on this Decree, the construction of telecommunications towers requires permits from the relevant governmental institution and the local government determines the placement of the towers and the location in which the towers can be constructed. Furthermore, a telecommunications provider or tower provider which owns telecommunications towers is obliged to allow other telecommunications operators to utilize its telecommunications towers without any discrimination. The Decree also mandated that each of the tower contractor, provider and owner be 100% locally owned companies.
On March 30, 2009, the Ministry of Domestic Affairs, Ministry of Public Works, MOCIT and the Head of BKPM jointly issued Decrees No. 18 Year 2009, No. 07/PRT/M/2009, No. 19/PER/M.KOMINFO/03/09 and No. 3/P/2009 on the Detailed Guidelines of Construction and Utilization of Sharing Telecommunications Towers. The Decrees define the requirements and procedures for tower construction. A tower provider can be either a telecommunications operator or a non-telecommunications operator. If a tower provider is a non-telecommunications operator, it is required to be a 100% locally owned company.
On September 3, 2010, based on letter No. 12/67/DASP/25 from Bank Indonesia (Central Bank), the Company obtained approval to become a “money remittance provider”to customers in the local and international markets.
On December 13, 2010, based on letter No. 2619/BSN/D3-d3/12/2010 from the Badan Standardisasi Nasional (National Standardization Bureau), the Company obtained Issuer Identification Number (IIN) on its applications for“Indosat m-wallet” and“money remittance”. On March 23, 2011, the President of the Republic of Indonesia issued Regulation orPeraturan Pemerintah (“PP”) No. 3 year 2011 regarding money remittance. This regulation becomes the operational guidance for the Company as a “money remittance provider”.
13
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
1.
GENERAL (continued)
a.
Company’s Establishment (continued)
The Company is domiciled at Jalan Medan Merdeka Barat No. 21, Jakarta and has 4 regional offices located in Jakarta, Surabaya, Batam and Balikpapan.
Qatar Telecom QSC, Qatar (“Qatar Telecom”) is the ultimate parent company of the Company and subsidiaries (collectively referred to hereafter as “the Group”). The immediate parent company of the Group is Qatar Telecom (Qtel Asia) Pte. Ltd., Singapore.
b.
Company’s Public Offerings
All of the Company’s B shares have been registered with and traded on the Indonesia Stock Exchange (new entity after the merger of Jakarta Stock Exchange and Surabaya Stock Exchange in November 2007) since 1994. The Company’s American Depositary Shares (ADS, each representing 50 B shares), have also been traded on the New York Stock Exchange since 1994.
As of September 30, 2011, the Group’s outstanding bonds issued to the public are as follows:
Bond (Note 19) | Effective Date | Registered with and Traded on: |
1. Second Indosat Bonds series B in Year 2002 with Fixed Rate | November 6, 2002 | Indonesia Stock Exchange |
2. Fifth Indosat Bonds in Year 2007 with Fixed Rates | May 29, 2007 | Indonesia Stock Exchange |
3. Indosat Sukuk Ijarah II in Year 2007 | May 29, 2007 | Indonesia Stock Exchange |
4. Sixth Indosat Bonds in Year 2008 with Fixed Rates | April 9, 2008 | Indonesia Stock Exchange |
5. Indosat Sukuk Ijarah III in Year 2008 | April 9, 2008 | Indonesia Stock Exchange |
6. Seventh Indosat Bonds in Year 2009 with Fixed Rates | December 8, 2009 | Indonesia Stock Exchange |
7. Indosat Sukuk Ijarah IV in Year 2009 | December 8, 2009 | Indonesia Stock Exchange |
8. Guaranteed Notes Due 2020 | July 29, 2010 | Singapore Exchange Securities Trading Limited |
c.
Employees, Directors, Commissioners and Audit Committee
Based on a resolution at each of the Stockholders’ Annual General Meeting held on June 24, 2011 which is notarized under Deed No. 148 of Aulia Taufani, S.H., (as a substitute notary of Sutjipto, S.H.) on the same date and the Stockholders’ Annual General Meeting held on June 22, 2010 which is notarized under Deed No. 164 of Aulia Taufani, S.H., (as a substitute notary of Sutjipto, S.H.) on the same date, the composition of the Company’s Board of Commissioners and Board of Directors as of September 30, 2011 and December 31, 2010, respectively, is as follows:
Board of Commissioners:
September 30, 2011
December 31, 2010
President Commissioner
Abdulla Mohammed S.A
Abdulla Mohammed S.A
Al Thani
Al Thani
Commissioner
Dr. Nasser Mohd. A. Marafih
Dr. Nasser Mohd. A. Marafih
Commissioner
Rachmad Gobel
Rachmad Gobel
Commissioner
Richard Farnsworth Seney
Richard Farnsworth Seney
Commissioner
Parikesit Suprapto
Jarman
Commissioner
Rionald Silaban
Rionald Silaban
Commissioner
Alexander Rusli*
Alexander Rusli*
Commissioner
Chris Kanter*
Chris Kanter*
Commissioner
Thia Peng Heok George*
Thia Peng Heok George*
Commissioner
Soeprapto*
Soeprapto*
* Independent commissioner
14
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
1. GENERAL (continued)
c.
Employees, Directors, Commissioners and Audit Committee (continued)
Board of Directors:
September 30, 2011
December 31, 2010
President Director and
Chief Executive Officer
Harry Sasongko Tirtotjondro
Harry Sasongko Tirtotjondro
Director and Chief Financial
Officer
Curt Stefan Carlsson
Peter Wladyslaw Kuncewicz
Directorand Chief
Commercial Officer
Laszlo Imre Barta
Laszlo Imre Barta
Directorand Chief
Technology Officer
Hans Christiaan Moritz
Stephen Edward Hobbs
Directorand Chief Wholesale
and Infrastructure Officer
Fadzri Sentosa
Fadzri Sentosa
The composition of Company’s Audit Committee as of September 30, 2011 and December 31, 2010 is as follows:
Chairman
Thia Peng Heok George
Member
Chris Kanter
Member
Soeprapto
Member
Unggul Saut Marupa Tampubolon
Member
Kanaka Puradiredja
The Group has approximately 5,210 and 6,694 employees, including non-permanent employees, as of September 30, 2011 and December 31, 2010, respectively.
d.
Structure of the Company’s Subsidiaries
As of September 30, 2011 and December 31, 2010, the Company has direct and indirect ownership in the following Subsidiaries:
Percentage of Ownership (%)
Start of
Commercial
September 30,
December 31,
Name of Subsidiary
Location
Principal Activity
Operations
2011
2010
Indosat Palapa Company B.V.
(“IPBV”)(1)
Amsterdam
Finance
2010
100.00
100.00
Indosat Mentari Company B.V.
(“IMBV”)(1)
Amsterdam
Finance
2010
100.00
100.00
Indosat Finance Company B.V.
(“IFB”)
Amsterdam
Finance
2003
100.00
100.00
Indosat International Finance
Company B.V. (“IIFB”)
Amsterdam
Finance
2005
100.00
100.00
Indosat Singapore Pte. Ltd. (“ISPL”)
Singapore
Telecommunications
2005
100.00
100.00
PT Indosat Mega Media (“IMM”)
Jakarta
Multimedia
2001
99.85
99.85
PT Interactive Vision Media (“IVM”)(2)
Jakarta
Pay TV
-
99.83
-
PT Starone Mitra Telekomunikasi
(“SMT”)
Semarang
Telecommunications
2006
72.54
72.54
PT Aplikanusa Lintasarta
(“Lintasarta”)
Jakarta
Data Communication
1989
72.36
72.36
PT Lintas Media Danawa (“LMD”)
Information and
Jakarta
Communication Services
2008
50.65
50.65
PT Artajasa Pembayaran Elektronis
(“APE”)(3)
Jakarta
Telecommunications
2000
39.80
39.80
15
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
1.
GENERAL (continued)
d.
Structure of the Company’s Subsidiaries (continued)
Total Assets (Before Eliminations)
September 30,
December 31,
Name of Subsidiary
2011
2010
IPBV(1)
5,746,093
5,966,764
IMBV(1)
5,737,065
5,946,885
IFB
21,394
21,876
IIFB
9,003
9,635
ISPL
72,003
54,353
IMM
856,866
815,130
IVM
(2)
5,134
-
SMT
185,249
155,297
Lintasarta
1,780,802
1,739,896
LMD
4,581
2,671
APE(3)
267,352
221,297
(1)
IPBV and IMBV were incorporated in Amsterdam on April 28, 2010 to engage in treasury activities, to lend and borrow money, whether in the form of securities or otherwise, to finance enterprises and companies, to grant security in respect of their respective obligations or those of their group companies and third parties.
(2)
IVM, a subsidiary of IMM, was established on April 21, 2009 to engage in Pay TV services. IMM made capital injection to IVM on March 9 and 30, 2011 totalling Rp4,999. On July 12, 2011, IVM got the license to conduct its Pay TV services. However, as of September 30, 2011, IVM has not yet operated.
(3)
Lintasarta has direct 55% ownership in APE.
e.
Merger of the Company, Satelindo, Bimagraha and IM3
Based on Merger Deed No. 57 dated November 20, 2003 (“merger date”) of Poerbaningsih Adi Warsito, S.H., the Company, Satelindo, PT Bimagraha Telekomindo (“Bimagraha”) and PT Indosat Multi Media Mobile (“IM3”) agreed to merge, with the Company as the surviving entity. All assets and liabilities owned by Satelindo, Bimagraha and IM3 were transferred to the Company on the merger date. These three companies were dissolved by operation of law without the need to undergo the regular liquidation process.
The names “Satelindo” and “IM3” in the following notes refer to these entities before they were merged with the Company, or as the entities that entered into contractual agreements that were taken over by the Company as a result of the merger.
f.
Approval and Authorization the Issuance of Interim Consolidated Financial Statements
The issuance of the interim consolidated financial statements of the Group as of September 30, 2011 and for the nine months ended September 30, 2011 and 2010 was approved and authorized by the Board of Directors on October 25, 2011, as reviewed and recommended for approval by the Audit Committee.
16
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a.
Basis of Presentation of Interim Consolidated Financial Statements
The interim consolidated financial statements have been prepared in accordance with Indonesian Financial Accounting Standards (“SAK”), which comprise the Statements and Interpretations issued by the Financial Accounting Standards Board of the Indonesian Institute of Accountants (“DSAK”) and the Regulations and the Guidelines on Financial Statement Presentation and Disclosures issued by BAPEPAM-LK. As disclosed further in the relevant succeeding Notes, several amended and published accounting standards were adopted effective January 1, 2011.
The interim consolidated financial statements are prepared in accordance with Statement of Financial Accounting Standards (“PSAK”) 1 (Revised 2009), “Presentation of Financial Statements”, and PSAK 3 (Revised 2010), “Interim Financial Reporting”, both adopted on January 1, 2011.
PSAK 1 (Revised 2009) regulates presentation of financial statements as to, among others, the objective, component of financial statements, fair presentation, materiality and aggregation, offsetting, distinction between current and non-current assets and short-term and long-term 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.
PSAK 3 (Revised 2010) regulates minimum presentation of interim financial statements, and also the principles of recognition and measurement in the complete or condensed interim financial statements.
The adoption of PSAK 1 (Revised 2009) has significant impact on the related presentation and disclosures in the interim consolidated financial statements.
The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those made in the preparation of the Group’s consolidated financial statements for the year ended December 31, 2010, except for the adoption of several amended PSAKs effective January 1, 2011 as disclosed in this Note.
The interim consolidated financial statements have been prepared on the accrual basis using the historical cost concept of accounting, except as disclosed in the relevant Notes herein.
The interim consolidated statements of cash flows, which have been prepared using the direct method, present receipts and disbursements of cash and cash equivalents classified into operating, investing and financing activities.
The reporting currency used in the interim consolidated financial statements is the Indonesian rupiah, which is the Group’s functional currency.
b.
Principles of Consolidation
From January 1, 2011
Effective January 1, 2011, the Group 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.
17
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b.
Principles of Consolidation (continued)
From January 1, 2011 (continued)
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 described 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 Group obtained 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 parent 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)
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 Group:
·
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 profit or loss; and
·
reclassifies the parent’s 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 equity holders of the parent company.
Prior to January 1, 2011
The proportionate shares of minority shareholders in net assets and net income or loss of the consolidated subsidiaries were previously presented as “Minority Interests” in the interim consolidated statements of financial position and as “Minority Interests in Net Loss (Income) of Subsidiaries” in the interim consolidated statements of comprehensive income.
18
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b.
Principles of Consolidation (continued)
Prior to January 1, 2011 (continued)
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 shareholder, 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.
The accounts of IPBV, IMBV, IFB, IIFB and ISPL were translated into rupiah amounts at the middle rates of exchange prevailing at balance sheet date for balance sheet accounts and the average rates during the period for profit and loss accounts. The resulting difference arising from the translations of the financial statements of IPBV, IMBV, IFB, IIFB and ISPL is presented as “Difference in Foreign Currency Translation” under the Equity section of the consolidated statements of financial position.
c.
Business Combinations
Effective January 1, 2011, the Group 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 January 1, 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 provision of PSAK 22 (Revised 2010), starting January 1, 2011, the Group:
·
ceased the goodwill amortization (Note 9);
·
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”.
As described herein, the adoption of PSAK 22 (Revised 2010) has significant impact on the financial reporting, including for the related disclosures in the consolidated financial statements.
From January 1, 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.
19
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c.
Business Combinations (continued)
From January 1, 2011 (continued)
When the Group acquires 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 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 Group’s 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 January 1, 2011
In comparison to the above, the following were the accounting policies applied on business combination prior to January 1, 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 Group 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 Group 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.
20
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d.
Cash and Cash Equivalents
Time deposits with original maturities of three months or less at the time of placement and deposits on call are considered as “Cash Equivalents”.
Cash in banks and time deposits which are pledged as collateral for bank guarantees are not classified as part of “Cash and Cash Equivalents”. These are presented as part of either “Other Current Financial Assets” or “Other Non-current Financial Assets”.
e.
Inventories
Inventories, which mainly consist of SIM cards, broadband modems, starter packs, cellular handsets and pulse reload vouchers are valued at the lower of cost or net realizable value. Cost is determined using the weighted average method.
In accordance with PSAK 14 (Revised 2008), the Group applies the guidance on the determination of inventory cost and its subsequent recognition as an expense, including any write-down to net realizable value, as well as guidance on the cost formula used to assign costs to inventories.
f.
Prepaid Expenses
Prepaid expenses, which mainly consist of frequency fee, rentals, upfront fee of 3G and BWA licenses and insurance are expensed as the related asset is utilized. The non-current portions of prepaid rentals and upfront fee of 3G and BWA licenses are shown as part of “Long-term Prepaid Rentals - Net of Current Portion” and “Long-term Prepaid Licenses - Net of Current Portion”, respectively.
g.
Investments in Associated Companies
Effective January 1, 2011, the Group applied PSAK 15 (Revised 2009), “Investments in Associated Companies”. The revised PSAK is applied retrospectively and prescribes the accounting for investments in associated companies as to 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.
The Group’s investment in its associated company is accounted for using the equity method. An associated company is an entity in which the Group has significant influence. Under the equity method, the cost of investment is increased or decreased by the Group’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 share of the results of operations of the associated company. Where there has been a change recognized directly in the equity of the associated company, the Group recognizes its share of any such changes and discloses this, when applicable, in the consolidated statements of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the associated company are eliminated to the extent of the Group’s interest in the associated company.
21
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g.
Investments in Associated Companies (continued)
The Group determines whether it is necessary to recognize an additional impairment loss on the Group’s investment in its associated company. The Group 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 Group 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.
h.
Property and Equipment
Property and equipment are stated at cost (which includes certain capitalized borrowing costs incurred during the construction phase), less accumulated depreciation and impairment in value.
Depreciation of property and equipment is computed using the straight-line method based on the estimated useful lives of the assets.
Property and equipment acquired in exchange for a non-monetary asset or for a combination of monetary and non-monetary assets are measured at fair values unless:
(i)
the exchange transaction lacks commercial substance, or
(ii)
the fair value of neither the assets received nor the assets given up can be measured reliably.
The acquired assets are measured this way even if the Group cannot immediately derecognize the assets given up. If the acquired assets cannot be reliably measured at fair value, their value is measured at the carrying amount of the assets given up.
In accordance with PSAK 16 (Revised 2007), the Group has chosen the cost model for the measurement of its property and equipment. The Group performs periodic review and assessment of the economic useful lives of the assets. Below are the estimated useful lives (in years).
Years
Buildings
20
Information technology equipment
3 to 5
Office equipment
3 to 5
Building and leasehold improvements
3 to 15
Vehicles
5
Cellular technical equipment
10
Transmission and cross-connection equipment
10 to 15
Fixed Wireless Access (“FWA”) technical equipment
10
Operation and maintenance center and
measurement unit
3 to 5
Fixed access network equipment
10
Landrights are stated at cost.
The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments which enhance an asset’s condition on its initial performance, are capitalized. When properties are retired or otherwise disposed of, their costs and the related accumulated depreciation are derecognized from the accounts, and any resulting gains or losses are recognized in the consolidated statement of comprehensive income for the period.
22
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
h.
Property and Equipment (continued)
Properties under construction and installation are stated at cost. All borrowing costs, which include interest, amortization of ancillary costs and foreign exchange differentials (estimated quarterly to the extent that they are regarded as an adjustment to interest costs by capping the exchange differences taken as borrowing costs at the amount of borrowing costs on the functional currency equivalent borrowings) that can be attributed to qualifying assets, are capitalized to the cost of properties under construction and installation. Capitalization of borrowing costs ceases when the construction or installation is completed and the constructed or installed asset is ready for its intended use.
The residual values, useful lives and methods of depreciation of property and equipment are reviewed and adjusted prospectively, if appropriate, at each financial year end.
i.
Impairment of Non-financial Assets
Effective January 1, 2011, the Group prospectively adopted PSAK 48 (Revised 2009), “Impairment of Assets”, including goodwill and assets acquired from business combinations before January 1, 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 this revised PSAK requires the entity to recognize an impairment loss. This revised PSAK also specifies when an entity should reverse an impairment loss and prescribes disclosures.
As described herein, the adoption of PSAK 48 (Revised 2009) has a significant impact on the financial reporting, including for the related disclosures, mainly on the impairment test of goodwill which is required at least once a year and more frequently when indications for impairment exist.
The Group assesses at each annual reporting period whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e., an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of the asset’s or 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 groups 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.
23
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
i.
Impairment of Non-financial Assets (continued)
Impairment losses of continuing operations, if any, are recognized in the interim consolidated statements of comprehensive income under expense categories that are consistent with the functions of the impaired assets.
An assessment is made at each annual reporting period as to whether there is any indication that previously recognized impairment losses recognized for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss for an asset other than goodwill is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior periods. Reversal of an impairment loss is recognized in the interim consolidated statements of comprehensive income. After such a reversal, the depreciation charge on the said asset is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. Where the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.
j.
Leases
In accordance with PSAK 30 (Revised 2007), a lease that transfers substantially all the risks and rewards incidental to ownership is classified as finance lease. At the commencement of the lease term, a lessee recognizes finance lease as asset and liability in its statement of financial position at an amount equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. Minimum lease payments are apportioned between the finance charges and the reduction of the outstanding liability. The finance charges are allocated to each period during the lease term. Leased asset held by the lessee under a finance lease is depreciated consistently using the same method used for depreciable assets that are directly owned or is fully depreciated over the shorter of the lease term and its useful life, if there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term.
Leases which do not transfer substantially all the risks and rewards incidental to ownership are classified as operating leases. Operating lease payments are recognized as an expense on a straight-line basis over the lease term.
In 2006, the Company was granted a license to use 2.1 GHz radio frequency spectrum (a 3G mobile communications technology - Note 1a) by the MOCIT. The upfront fee is recorded as part of Long-term Prepaid Licenses for the non-current portion and Prepaid Expenses for the current portion, and amortized over the 10-year license term using the straight-line method.
In 2009, the Company received additional 3G license (Note 1a), and IMM was granted an operating license for “Packet Switched” local telecommunications network using 2.3 GHz radio frequency spectrum of Broadband Wireless Access (“BWA”). The Company and IMM were obliged to, among others, pay upfront fee and annual radio frequency fee for 10 years (Note 32j).
24
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
j.
Leases (continued)
Management believes, as supported by written confirmation from the DGPT, that the 3G and BWA licenses may be returned at any time without any financial obligation to pay the remaining outstanding annual radio frequency fees (i.e., the license arrangement does not transfer substantially all the risks and rewards incidental to ownership).
Accordingly, the Company and IMM recognize the annual radio frequency fee as operating lease expense, amortized using the straight-line method over the term of the rights to operate the 3G and BWA licenses. Management evaluates its plan to continue to use the licenses on an annual basis.
k.
Revenue and Expense Recognition
Effective January 1, 2011, the Group adopted PSAK 23 (Revised 2010), “Revenue”. This revised PSAK identifies the circumstances in which the criteria on revenue recognition will be met and, therefore, revenue may be recognized, and prescribes the accounting treatment of revenue arising from certain types of transactions and events, and also provides practical guidance on the application of the criteria on revenue recognition. The adoption of this revised PSAK has no significant impact on the interim consolidated financial statements. Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and Value Added Taxes (“VAT”). The following specific recognition criteria must also be met before revenue is recognized:
Cellular
Cellular revenues arising from airtime and roaming calls are recognized based on the duration of successful calls made through the Company’s cellular network and presented on a gross basis.
For post-paid subscribers, monthly service fees are recognized as the service is provided.
The activation component of starter package sales has been deferred and recognized as revenue over the expected average period of the customer relationship. Sales of initial/reload vouchers are recorded as unearned revenue and recognized as revenue upon usage of the airtime or upon expiration of the airtime.
Sales of wireless broadband modems and cellular handsets are recognized upon delivery to the customers.
Revenues from wireless broadband data communications are recognized based on the duration of usage or fixed monthly charges depending on the arrangement with the customers.
Cellular revenues are presented on a net basis, after compensation to value added service providers.
Customer Loyalty Program
The Company operates a customer loyalty program called “Poin Plus Plus”, which allows customers to accumulate points for every reload and payment by the Company’s prepaid and post-paid subscribers, respectively. The points can then be redeemed for free telecommunications and non-telecommunications products, subject to a minimum number of points being obtained. Starting July 29, 2011, the “Poin Plus Plus” program has been replaced with the “Indosat Senyum” program.
25
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
k.
Revenue and Expense Recognition (continued)
Cellular (continued)
Customer Loyalty Program (continued)
Customer loyalty credits are accounted for as a separate component of the sales transaction in which they are granted. The Company records a liability at the time of reload and payment by its prepaid and post-paid subscribers, respectively, based on the fair value expected to be incurred to supply products in the future. The consideration received is allocated between the cellular products sold and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points issued is deferred and recognized as revenue when the points are redeemed or when the redemption period expires.
Dealer Commissions
Consideration in the form of sales discount given by the Company to a dealer is recognized as a reduction of revenue.
If the Company receives, or will receive, an identifiable benefit in exchange for a consideration given by the Company to a dealer, and the fair value of such benefit can be reasonably estimated, the consideration will be recorded as a marketing expense.
Tower Leasing
Revenue from tower leasing is recognized on the straight-line basis over the lease term based on the amount stated in the agreement between the Company and the lessee. Based on the Company’s assessment on the current tower leasing arrangements, the leasing transactions are classified as operating leases (Note 2j).
Multimedia, Data Communication, Internet (“MIDI”)
Internet
Revenues from installation services have been deferred and recognized over the expected average period of the customer relationship. Revenues from monthly service fees are recognized as the services are provided. Revenues from usage charges are recognized monthly based on the duration of internet usage or based on the fixed amount of charges depending on the arrangement with the customers.
Frame Net, World Link and Direct Link
Revenues from installation services have been deferred and recognized over the expected average period of the customer relationship. Revenues from monthly service fees are recognized as the services are provided.
Satellite Lease
Revenues are recognized on the straight-line basis over the lease term.
Revenues from other MIDI services are recognized when the services are rendered.
26
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
k.
Revenue and Expense Recognition (continued)
Fixed Telecommunications
International Calls
Revenue from outgoing international call traffic has been reported on a gross basis.
In addition, starting January 1, 2010, the Company has decided to reclassify the portion of incoming calls revenue that belongs to the Company’s cellular segment. The Company believes that this change will bring the Company’s revenue presentation to be aligned more closely with the Company’s profit and loss performance and to provide reliable and more relevant information to stockholders and users of the accounts. To improve the comparability of the consolidated financial statements, the Company made accounts reclassification in the consolidated financial statements for the nine months ended September 30, 2010 (Note 40).
Fixed Wireless
Fixed wireless revenues arising from usage charges are recognized based on the duration of successful calls made through the Company’s fixed network.
For post-paid subscribers, monthly service fees are recognized as the service is provided.
The activation component of starter package sales has been deferred and recognized as revenue over the expected average period of the customer relationship. Sale of initial/reload vouchers is recorded as unearned income and recognized as income upon usage of the airtime or upon expiration of the airtime.
Fixed Line
Revenues from fixed line installations have been deferred and recognized over the expected average period of the customer relationship. Revenues from usage charges are recognized based on the duration of successful calls made through the Company’s fixed network.
Interconnection Revenue
Revenues from network interconnection with other domestic and international telecommunications carriers are recognized monthly on the basis of the actual recorded traffic for the month.
Expenses
Interconnection Expenses
Expenses from network interconnection with other domestic and international telecommunications carriers are accounted for as operating expenses in the period these are incurred.
Other Expenses
Expenses are recognized when incurred.
27
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l.
Personnel Costs
Personnel costs which are directly related to the development, construction and installation of property and equipment are capitalized as part of the cost of such assets.
m.
Pension Plan and Employee Benefits
Pension costs under the Group’s defined benefit pension plans are determined by periodic actuarial calculation using the projected-unit-credit method and applying the assumptions on discount rate, expected return on plan assets and annual rate of increase in compensation.
Actuarial gains or losses from post-employment benefits are recognized as income or expense 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 or 10% of the fair value of plan assets, at that date. These gains or losses in excess of the 10% corridor are recognized on a straight-line basis over the expected average remaining working lives of the employees. The past service costs from post-employment benefits are recognized as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits have already vested, following the introduction of changes to a pension plan, past service costs are recognized immediately.
Actuarial gains or losses and past service costs from other long-term employee benefits are recognized immediately in the current period’s consolidated statement of comprehensive income.
The Group recognizes gains or losses on the curtailment of a defined benefit plan when the curtailment occurs (when there is a commitment to make a material reduction in the number of employees covered by a plan or when there is an amendment of the defined benefit plan terms such that a material element of future services to be provided by current employees will no longer qualify for benefits, or will qualify only for reduced benefits). The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial gains and losses and past service cost that had not previously been recognized.
The Group follows PSAK 24 (Revised 2004), “Employee Benefits”, which regulates the accounting and disclosure for employee benefits, both short-term (e.g., paid annual leave, paid sick leave) and long-term (e.g., long-service leave, post-employment medical benefits).
n.
Financial Instruments
Effective January 1, 2010, the Group has applied PSAK 50 (Revised 2006), “Financial Instruments: Presentation and Disclosures”, and PSAK 55 (Revised 2006), “Financial Instruments: Recognition and Measurement”, which superseded PSAK 50, “Accounting for Certain Investments in Securities”, and PSAK 55 (Revised 1999), “Accounting for Derivative Instruments and Hedging Activities”.
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 should 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.
28
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Financial Instruments (continued)
PSAK 55 (Revised 2006) establishes 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 derivatives, the categories of financial instruments, recognition and measurement, hedge accounting and determination of hedging relationships, among others.
n1.
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, or available-for-sale financial assets, as appropriate. The Group determines the classification of its financial assets at initial recognition.
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 Group commits to purchase or sell the assets.
The Group’s financial assets include cash and cash equivalents, trade and other accounts receivable, due from related parties, derivative financial instruments and other current and non-current financial assets (quoted and unquoted financial instruments).
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
•
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss.
Financial assets 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). Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit and loss are carried in the consolidated statements of financial position at fair value with changes in fair value recognized in the consolidated statements of comprehensive income.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in the consolidated statements of comprehensive income. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.
The Group’s financial assets classified at fair value through profit or loss consist of derivative assets.
29
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Financial Instruments (continued)
n1.
Financial assets (continued)
Subsequent measurement (continued)
•
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in the consolidated statements of comprehensive income. The losses arising from impairment are also recognized in the consolidated statements of comprehensive income.
The Group’s cash and cash equivalents, trade and other accounts receivable, due from related parties, other current financial assets, and other non-current financial assets are included in this category.
•
Held-to-maturity (HTM) investments
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as HTM when the Group has the positive intention and ability to hold them to maturity. After initial measurement, HTM investments are measured at amortized cost using the EIR method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in the consolidated statements of comprehensive income. The losses arising from impairment are recognized in the consolidated statements of comprehensive income.
The Group did not have any HTM investments during the nine months ended September 30, 2011 and 2010 and the year ended December 31, 2010.
•
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 in any of the three preceding categories. After initial measurement, AFS financial assets are measured at fair value with unrealized gains or losses recognized in equity until the investment is derecognized at which time the cumulative gain or loss is recognized or determined to be impaired, at which time the cumulative loss is reclassified from equity to comprehensive income.
The Group has the following investments classified as AFS:
-
Investments in shares of stock that do not have readily determinable fair value in which the equity interest is less than 20%, and other long-term investments. These are carried at cost.
-
Investments in equity shares that have readily determinable fair value in which the equity interest is less than 20% and which are classified as AFS. These are recorded at fair value.
30
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Financial Instruments (continued)
n2.
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 Group determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, inclusive of directly attributable transaction costs.
The Group’s financial liabilities include trade accounts payables, procurement payable, accrued expenses, deposits from customers, loans and bonds payable, due to related parties, derivative financial instruments and other current financial liabilities.
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
•
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). Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the consolidated statements of comprehensive income.
•
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method.
Gains or losses are recognized in the consolidated statements of comprehensive income when the liabilities are derecognized as well as through the EIR amortization process.
n3.
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.
31
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Financial Instruments (continued)
n4.
Fair value of financial instruments
The fair value of financial instruments that are traded in active market at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long position and ask price for short position), without any deduction for transaction costs. 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 transactions, 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 adjusts the price in the more advantageous 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's own credit risk associated with the instrument is taken into account.
n5.
Amortized cost of financial instruments
Amortized cost is computed using the EIR 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 EIR.
n6.
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired.
•
Financial assets carried at amortized cost
For loans and receivables carried at amortized cost, the Group first assesses 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 Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assess them 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 EIR. If a loan or receivable has a variable interest rate, the discount rate for measuring impairment loss is the current EIR.
32
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Financial Instruments (continued)
n6.
Impairment of financial assets (continued)
•
Financial assets carried at amortized cost (continued)
The carrying amount of the asset is reduced through the use of an allowance 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 rate of interest used to discount future cash flows for the purpose of measuring impairment loss. 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 Group. If, in a subsequent period, 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 account. If a future write-off is later recovered, the recovery is recognized in the consolidated statements of comprehensive income.
•
AFS financial assets
In the case of an equity investment 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 equity to comprehensive income. Impairment loss on equity investment is not reversed through the consolidated statements of comprehensive income; increase in its fair value after impairment is recognized in equity.
In the case of a debt instrument classified as an AFS financial asset, impairment is assessed based on the same criteria as financial asset carried at amortized cost. Future interest income is based on the reduced carrying amount and is accrued based on the rate of interest used to discount future cash flows for the purpose of measuring impairment loss. Such accrual is recorded as part of the “Interest Income” account in the consolidated statements of comprehensive income. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the consolidated statements of comprehensive income, the impairment loss is reversed through the consolidated statements of comprehensive income.
n7.
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 Group has transferred its rights to receive cash flows from the asset or has 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 Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
33
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n.
Financial Instruments (continued)
n7.
Derecognition of financial assets and liabilities (continued)
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 derecognition 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.
n8.
Derivative financial instruments
The Company enters into and engages in cross currency swaps, interest rate swaps and other permitted instruments, if considered necessary, for the purpose of managing its foreign exchange and interest rate exposures emanating from the Company’s loans and bonds payable in foreign currencies. These derivative financial instruments, while providing effective economic hedges of specific interest rate and foreign exchange risks under the Company’s financial risk management objectives and policies, do not meet the criteria for hedge accounting as provided in PSAK 55 (Revised 2006) and are initially recognized at fair value on the date the derivative contract is entered into and are subsequently re-measured at fair value.
Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in fair value of derivatives during the period, which are entered into as economic hedges that do not qualify for hedge accounting, are taken directly to the consolidated statements of comprehensive income.
Derivative assets and liabilities are presented under current assets and liabilities, respectively. Embedded derivative is presented with the host contract on the consolidated statements of financial position which represents an appropriate presentation of overall future cash flows for the instrument taken as a whole.
The net changes in fair value of derivative instruments, swap cost or income, termination cost or income, and settlement of derivative instruments are credited (charged) to “Gain (Loss) on Change in Fair Value of Derivatives - Net”, which is presented under Other Income (Expenses) in the consolidated statements of comprehensive income.
o.
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 exchange rates at such date and the resulting gains or losses are credited or charged to current operations, except for foreign exchange differentials that can be attributed to qualifying assets which are capitalized to properties under construction and installation.
34
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
o.
Foreign Currency Transactions and Balances (continued)
For September 30, 2011 and 2010, the foreign exchange rates used (in full amounts) were Rp8,823 and Rp8,924 respectively, per US$1 computed by taking the average of the buying and selling rates of bank notes last published by Bank Indonesia for the period.
p.
Income Tax
Current tax expense is provided based on the estimated taxable income for the period. Deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. Future tax benefits, such as the carryover of unused tax losses, are also recognized to the extent that realization of such benefits is probable. The tax effects for the period are allocated to current operations, except for the tax effects from transactions which are directly charged or credited to equity.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in
the year 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 financial position date. Changes in the carrying amount of deferred tax assets and liabilities due to a change in tax rates are credited or charged to current period operations, except to the extent that they relate to items previously charged or credited to equity.
Amendment to tax obligations is recorded when an assessment is received or, if appealed, when the result of the appeal is determined.
For each of the consolidated entities, the tax effects of temporary differences and tax loss
carryover, which individually are either assets or liabilities, are shown at the applicable net amounts.
q.
Segment Reporting
Effective January 1, 2011, the Group applied PSAK 5 (Revised 2009), “Operating Segments”. The 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 interim consolidated financial statements.
A segment is a distinguishable component of the Group that is engaged in providing certain products (business segment), which component is subject to risks and rewards that are different from those of other segments.
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.
r.
Basic Earnings per Share/ADS
In accordance with PSAK 56, “Earnings per Share”, the amount of basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during the period.
The amount of basic earnings per ADS is computed by multiplying basic earnings per share by 50, which is equal to the number of shares per ADS.
35
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
s.
Transactions with Related Parties
Effective January 1, 2011, the Group applied PSAK 7 (Revised 2010), “Related Party Disclosures”. The 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 significant 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 30.
t.
Adoption of Other Revised Accounting Standards and Interpretations
Other than the revised accounting standards previously mentioned above, the Group also adopted the following revised accounting standards and interpretations on January 1, 2011, which were considered relevant to the interim 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 19 (Revised 2010), “Intangible Assets”
·
PSAK 25 (Revised 2009), “Accounting Policies, Changes in Accounting Estimates and Errors”
·
PSAK 57 (Revised 2009), “Provisions, Contingent Liabilities and Contingent Assets”
·
PSAK 58 (Revised 2009), “Non-current Assets Held for Sale and Discontinued Operations”
·
Interpretations of Financial Accounting Standards (ISAK) 7, “Consolidation - Special Purpose Entities”
·
ISAK 9, “Changes in Existing Decommissioning Restoration and Similar Liabilities”
·
ISAK 10, “Customer Loyalty Programs”
·
ISAK 17, “Interim Financial Reporting and Impairment”
3.
MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Group’s consolidated financial statements requires 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.
a.
Judgments
In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those including estimations and assumptions, which have the most significant effect on the amounts recognized in the consolidated financial statements:
·
Determination of functional currency
The functional currencies of the entities under the Group are the currency of the primary economic environment in which each entity operates. It is the currency that mainly influences the revenue and cost of rendering services.
36
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
3.
MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)
a.
Judgments (continued)
·
Leases
The Group has various lease agreements as lessors in respect of certain properties and equipment. The Group evaluates whether significant risks and rewards of ownership of the leased properties are transferred to the lessee or retained by the Group based on PSAK30, “Leases”, which requires the Group to make judgments and estimates of transfer of risks and rewards of ownership of leased properties.
b.
Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below:
·
Determination of fair values of financial assets and financial liabilities
When the fair value of financial assets and financial liabilities recorded in the consolidated statements of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
·
Estimating useful lives of property and equipment and intangible assets
The Group estimates the useful lives of its property and equipment and intangible assets based on expected asset utilization as anchored on business plans and strategies that also consider expected future technological developments and market behavior. The estimation of the useful lives of property and equipment is based on the Group’s collective assessment of industry practice, internal technical evaluation and experience with similar assets. The estimated useful lives are reviewed at least each financial year-end and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limitations on the use of the assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above.
The amounts and timing of recorded expenses for any period will be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the Group’s property and equipment will increase the recorded operating expenses and decrease non-current assets.
·
Goodwill and intangible assets
The consolidated financial statements reflect acquired businesses after the completion of the respective acquisition. The Company accounts for the acquired businesses using the acquisition method starting January 1, 2011 and the purchase method for prior year acquisitions, which requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair market values of the acquiree’s identifiable assets and liabilities at the acquisition date. Any excess in the purchase price over the estimated fair market values of the net assets acquired is recorded as goodwill in the consolidated statements of financial position. Thus, the numerous judgments made in estimating the fair market value to be assigned to the acquiree’s assets and liabilities can materially affect the Company’s financial performance.
37
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
3.
MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)
b.
Estimates and Assumptions (continued)
·
Realizability of deferred income tax assets
The Group reviews the carrying amounts of deferred income tax assets at the end of each reporting period and reduces these to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred income tax assets to be utilized. The Group’s assessment on the recognition of deferred income tax assets on deductible temporary differences is based on the level and timing of forecasted taxable income of the subsequent reporting periods. This forecast is based on the Group’s past results and future expectations on revenues and expenses as well as future tax planning strategies. However, there is no assurance that the Group will generate sufficient taxable income to allow all or part of the deferred income tax assets to be utilized.
·
Estimating allowance for impairment loss on receivables
If there is an objective evidence that an impairment loss has been incurred on trade receivables, the Group estimates the allowance for impairment losses related to its trade receivables that are specifically identified as doubtful for collection. The level of allowance is evaluated by management on the basis of factors that affect the collectibility of the accounts. In these cases, the Group uses judgment based on the best available facts and circumstances, including but not limited to, the length of the Group’s relationship with the customers and the customers’ credit status based on third-party credit reports and known market factors, to record specific reserves for customers against amounts due in order to reduce the Group’s receivables to amounts that it expects to collect. These specific reserves are re-evaluated and adjusted as additional information received affects the amounts estimated.
In addition to specific allowance against individually significant receivables, the Group also assesses a collective impairment allowance against credit exposure of its customers which are grouped based on common credit characteristic, which group, although not specifically identified as requiring a specific allowance, has a greater risk of default than when the receivables were originally granted to customers. This collective allowance is based on historical loss experience using various factors such as historical performance of the customers within the collective group, deterioration in the markets in which the customers operate, and identified structural weaknesses or deterioration in the cash flows of customers.
·
Estimation of pension cost and other employee benefits
The cost of defined benefit plan and present value of the pension obligation are determined using projected-unit-credit method. Actuarial valuation includes making various assumptions which consist, among other things, discount rates, expected rates of return on plan assets, rates of compensation increases and mortality rates. Actual results that differ from the Group’s assumptions are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses at the end of the previous reporting period exceed 10% of the higher of the present value of defined benefit obligation and the fair value of plan assets at that date. Due to the complexity of the valuation, the underlying assumptions and their long-term nature, a defined benefit obligation is highly sensitive to changes in assumptions.
While the Group believes that its assumptions are reasonable and appropriate, significant differences in the Group’s actual experience or significant changes in its assumptions may materially affect the costs and obligations of pension and other long-term employee benefits. All assumptions are reviewed at each reporting date.
38
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
3.
MANAGEMENT’S USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS (continued)
b.
Estimates and Assumptions (continued)
·
Asset retirement obligations
Asset retirement obligations are recognized in the period in which they are incurred if a reasonable estimate of fair value can be made. The recognition of the obligations requires an estimation of the cost to restore/dismantle on a per location basis and is based on the best estimate of the expenditure required to settle the obligation at the future restoration/dismantlement date, discounted using a pre-tax rate that reflects the current market assessment of the time value of money and, where appropriate, the risk specific to the liability.
·
Revenue recognition
The Group’s revenue recognition policies requires to make use of estimates and assumptions that may affect the reported amounts of revenues and receivables.
The Company’s agreements with domestic and foreign carriers for inbound and outbound traffic subject to settlements require traffic reconciliations before actual settlement is done, which may not be the actual volume of traffic as measured by the Company. Initial recognition of revenues is based on observed traffic adjusted by the normal experience adjustments, which historically are not material to the consolidated statements of comprehensive income. Differences between the amounts initially recognized and the actual settlements are taken up in the account upon reconciliation. However, there is no assurance that the use of such estimates will not result in material adjustments in future periods.
The Group recognizes revenues from installation and activation-related fees and the corresponding costs over the expected average periods of customer relationship for cellular, MIDI and fixed telecommunications services. The Group estimates the expected average period of customer relationship based on the most recent churn-rate analysis.
·
Uncertain tax exposure
In certain circumstances, the Group may not be able to determine the exact amount of its current or future tax liabilities due to ongoing investigations by, or negotiations with, the taxation authority. Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. In determining the amount to be recognized in respect of an uncertain tax liability, the Group applies similar considerations as it would use in determining the amount of a provision to be recognized in accordance with PSAK 57, “Provisions, Contingent Liabilities and Contingent Asset”.The Group makes an analysis of all tax positions related to income taxes to determine if a tax liability for unrecognized tax benefit should be recognized.
As of September 30, 2011, the Company is subject to tax audit for fiscal year 2010.
The Group presents interest and penalties for the underpayment of income tax, if any, under Other Income (Expenses) as part of “Others - net” in the consolidated statements of comprehensive income.
39
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
4.
CASH AND CASH EQUIVALENTS
This account consists of the following:
September 30,
December 31,
2011
2010
Cash on hand
Rupiah
1,181
1,682
U.S. dollar (US$7 in 2011 and US$12 in 2010)
66
110
1,247
1,792
Cash in banks
Related parties (Note 30)
Rupiah
PT Bank Mandiri (Persero) Tbk (“Mandiri”)
38,540
45,792
PT Bank Rakyat Indonesia (Persero) Tbk (“BRI”)
11,753
11,345
PT Bank Negara Indonesia (Persero) Tbk (“BNI”)
4,377
4,461
PT Bank Syariah Mandiri (“Mandiri Syariah”)
1,983
1,215
PT Bank Pembangunan Daerah Yogyakarta
(“BPD - Yogyakarta”)
1,317
256
PT Bank Pembangunan Daerah Sumatera Utara
(“BPD - Sumut”)
1,126
662
PT Bank Tabungan Negara (Persero) Tbk (“BTN”)
223
1,270
Others (each below Rp1,000)
1,141
8,604
U.S. dollar
Mandiri (US$6,942 in 2011 and US$4,606 in 2010)
61,254
41,412
Others (US$19 in 2011 and US$120 in 2010)
170
1,090
Third parties
Rupiah
The Hongkong and Shanghai Banking Corporation
Limited, Jakarta Branch (“HSBC”)
11,785
592
PT Bank Central Asia Tbk (“BCA”)
9,363
2,284
PT Bank CIMB Niaga Tbk (“CIMB Niaga”)
7,920
21,845
Citibank N.A., Jakarta Branch (“Citibank”)
7,722
2,848
PT Bank Bukopin Tbk (“Bukopin”)
2,318
9,308
Others (each below Rp5,000)
10,136
12,867
U.S. dollar
Fortis Bank N.V., The Netherlands (US$6,597 in 2011 and
US$6,960 in 2010)
58,210
62,577
Citibank N.A., Singapore Branch (US$5,345 in 2011 and
US$4,945 in 2010)
47,156
44,464
Deutsche Bank AG, Jakarta Branch (“DB”)
(US$1,690 in 2011 and US$91 in 2010)
14,908
817
Citibank
(US$1,566 in 2011 and US$677 in 2010)
13,814
6,087
Others (US$259 in 2011 and US$212 in 2010)
2,285
1,899
307,501
281,695
40
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
4. CASH ANDCASH EQUIVALENTS (continued)
September 30,
December 31,
2011
2010
Time deposits and deposits on call
Related parties (Note 30)
Rupiah
Mandiri
374,126
421,400
BNI
135,820
141,185
Mandiri Syariah
120,000
31,000
BRI
110,700
68,500
BTN
93,250
88,500
PT Bank Pembangunan Daerah Jawa Tengah
(“BPD - Jawa Tengah”)
17,850
-
PT Bank BRI Syariah
16,100
5,000
BPD - Yogyakarta
1,000
1,000
PT Bank Pembangunan Daerah Jawa Barat
(“BPD - Jawa Barat”)
-
8,350
U.S. dollar
Mandiri (US$8,040 in 2011 and US$1,540 in 2010)
70,936
13,845
BPD - Jawa Barat (US$110 in 2011 and 2010)
971
1,484
BRI (US$80,000 in 2010)
-
719,280
Third parties
Rupiah
PT Bank Syariah Muamalat Indonesia Tbk (“Muamalat”)
88,500
48,500
CIMB Niaga
49,500
22,500
DB
47,351
5,232
PT Bank Himpunan Saudara 1906, Tbk
32,100
15,400
PT Bank Tabungan Pensiunan Nasional Tbk
28,500
12,000
PT Bank Mega Syariah
23,950
13,250
Bukopin
22,900
21,400
PT Bank Danamon Indonesia Tbk
15,000
15,900
PT Bank Internasional Indonesia
12,500
13,000
PT Bank Bumiputera
9,500
-
Others (each below Rp5,000)
7,100
13,080
U.S. dollar
DB (US$18,244 in 2011 and US$5,454 in 2010)
160,964
49,038
Muamalat (US$7,000 in 2011 and US$5,000 in 2010)
61,761
44,955
CIMB Niaga (US$2,000 in 2010)
-
17,984
1,500,379
1,791,783
Total
1,809,127
2,075,270
Time deposits and deposits on call denominated in rupiah earned interest at annual rates ranging from 2.50% to 9.75% in 2011 and from 2.50% to 9.50% in 2010, while those denominated in U.S. dollar earned interest at annual rates ranging from 0.05% to 2.50% in 2011 and from 0.05% to 4.75% in 2010.
The interest rates on time deposits and deposits on call in related parties are comparable to those offered by third parties.
41
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
5. ACCOUNTS RECEIVABLE - TRADE
This account consists of the following:
September 30,
December 31,
2011
2010
Related parties (Note 30)
Telkom (including US$56 in 2011 and US$55 in 2010)
29,945
56,108
Others (including US$7,524 in 2011 and US$7,764 in 2010)
245,568
214,038
Sub-total
275,513
270,146
Less allowance for impairment
62,192
47,640
Net
213,321
222,506
Third parties
Local companies (including US$16,047 in 2011 and US$13,956
in 2010)
745,181
628,224
Overseas international carriers (US$75,500 in 2011 and
US$93,755 in 2010)
666,137
842,954
Post-paid subscribers from:
Cellular
251,457
255,973
Fixed telecommunication
17,226
47,239
Sub-total
1,680,001
1,774,390
Less allowance for impairment
448,622
448,470
Net
1,231,379
1,325,920
Total
1,444,700
1,548,426
The aging schedule of the accounts receivable - trade is as follows:
September 30, 2011
December 31, 2010
Number of Percentage Percentage
Months Outstanding
Amount
(%)
Amount
(%)
Related parties
0 - 6 months
191,642
69.56
201,256
74.50
7 - 12 months
23,849
8.66
47,973
17.76
13 - 24 months
25,245
9.16
6,913
2.56
Over 24 months
34,777
12.62
14,004
5.18
Total
275,513
100.00
270,146
100.00
Third parties
0 - 6 months
709,847
42.25
787,871
44.40
7 - 12 months
305,723
18.20
279,806
15.77
13 - 24 months
304,370
18.12
308,808
17.40
Over 24 months
360,061
21.43
397,905
22.43
Total
1,680,001
100.00
1,774,390
100.00
42
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
5.
ACCOUNTS RECEIVABLE - TRADE (continued)
The changes in the allowance for impairment of accounts receivable - trade are as follows:
Related
Third
Total
Parties
Parties
September 30, 2011 (nine months)
Balance at beginning of period
496,110
47,640
448,470Provision (Note 27)17,558
14,744
2,814Net effect of foreign exchange adjustment
(2,854
)
(192
)
(2,662
)
Balance at end of period
510,814
62,192
448,622
Individual impairment
174,540
59,271
115,269
Collective impairment
336,274
2,921
333,353
Total
510,814
62,192
448,622
Gross amount of receivables, individually impaired,
before deducting any individually assessed
impairment allowance
260,979
110,111
150,868
December 31, 2010 (one year)
Balance at beginning of period
461,810
57,538
404,272
Provision (reversal) - net
67,041
(9,712
)
76,753
Write-offs
(23,586
)
-
(23,586
)
Net effect of foreign exchange adjustment
(9,155
)
(186
)
(8,969
)
Balance at end of period
496,110
47,640
448,470
Individual impairment
182,175
37,576
144,599
Collective impairment
313,935
10,064
303,871
Total
496,110
47,640
448,470
Gross amount of receivables, individually impaired,
before deducting any individually assessed
impairment allowance
405,926
118,486
287,440
The net effect of foreign exchange adjustment was due to the strengthening or weakening of the rupiah vis-à-vis the U.S. dollar in relation to U.S. dollar accounts previously provided with allowance and was credited or charged to “Gain on Foreign Exchange - Net”.
There are no significant concentrations of credit risk.
Management believes the established allowance is sufficient to cover impairment losses from uncollectible accounts receivable.
43
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
6.
PREPAID TAXES
This account consists of the following:
September 30,
December 31,
2011
2010
Claims for tax refund
797,771
651,657
VAT
5,870
47,701
Others
8,767
2,202
Total
812,408
701,560
Claims for tax refund as of September 30, 2011 and December 31, 2010 mainly consist of the Company’s corporate income tax for fiscal years 2006, 2009, 2010 and 2011, the Company’s income tax article 26 for fiscal years 2008 and 2009, and Satelindo’s corporate income tax for fiscal year 2002 and income tax article 26 for fiscal years 2002 and 2003.
On April 13, 2010, the Company received the tax refund from the Tax Office amounting to Rp41,753 for the remaining tax overpayment of 2004 corporate income tax based on the Tax Court’s Decision Letter dated December 4, 2009 on the 2004 corporate income tax.
On May 25, 2010, the Company received the Decision Letter from the Tax Court which declined the Company’s objection to the corrections of the 2004 and 2005 income tax article 26 amounting to Rp60,493 and Rp82,186, respectively. The Company charged the tax corrections to current operations, which are presented as part of “Other Income (Expenses) - Others - Net”.
On July 15, 2010, the Company received the Decision Letter No. KEP-357/WPJ.19/BD.05/2010 from the Directorate General of Taxation (“DGT”) declining the Company’s objection to the correction on Satelindo’s corporate income tax for fiscal year 2002 amounting to Rp105,809 (including penalties and interests). On October 14, 2010, the Company submitted an appeal letter to the Tax Court concerning the Company’s objection to the correction on Satelindo’s corporate income tax for fiscal year 2002. As of October 25, 2011, the Company has not received any decision from the Tax Court on such appeal.
On October 12, 2010, the Company submitted appeal letters to the Tax Court concerning the Company’s objection to the correction of Satelindo’s 2002 and 2003 income tax article 26. As of
October 25, 2011, the Company has not received any decision from the Tax Court on such appeals.
On October 29, 2010, the Company received the Decision Letter from the Tax Court which accepted the Company’s objection to the correction of the 2005 corporate income tax amounting to Rp38,155, which was offset against the underpayment of the Company’s 2008 and 2009 income tax article 26 based on Tax Collection Letters (“STPs”) received by the Company on September 17, 2010 (Note 16). On February 24, 2011, the Company received a copy of a Memorandum for Reconsideration Request (Memori Permohonan Peninjauan Kembali)from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated October 29, 2010 for the 2005 corporate income tax. On March 25, 2011, the Company submitted a Counter Memorandum for Reconsideration Request to the Supreme Court. As of October 25, 2011, the Company has not received any decision from the Supreme Court on such request.
On December 2, 2009, the Company submitted an appeal letter to the Tax Court regarding the remaining corrections of the Company’s 2006 corporate income tax. On April 26, 2011, the Company received the Tax Court’s Decision Letter which accepted the Company’s appeal. On June 21, 2011, the Company received the tax refund amounting to Rp82,626. On August 22, 2011, the Company received a copy of a Memorandum for Reconsideration Request (Memori Permohonan Peninjauan Kembali) from the Tax Court to the Supreme Court on the Tax Court’s Decision Letter dated April 26, 2011 for the 2006 corporate income tax. On September 21, 2011, the Company submitted a Counter Memorandum for Reconsideration Request to the Supreme Court. As of October 25, 2011, the Company has not received any decision from the Supreme Court on such request.
6.
PREPAID TAXES (continued)
On April 21, 2011, the Company received the assessment letter on tax overpayment (“SKPLB”) from the DGT for the Company’s 2009 corporate income tax amounting to Rp29,272, which amount is lower than the amount recognized by the Company in its financial statements. The Company accepted a part of the corrections amounting to Rp835, which was charged to current operations. On May 31, 2011, the Company received the tax refund of its claim for 2009 corporate income tax amounting to Rp23,695 after being offset with the accepted amount of tax correction of VAT for the period January - December 2009 (Note 16). On July 20, 2011, the Company submitted an objection letter to the Tax Office regarding the remaining correction on the Company’s 2009 corporate income tax. As of October 25, 2011, the Company has not received any decision from the Tax Office on such letter.
On April 25, 2011, IMM received SKPLB from the Tax Office for IMM’s 2009 corporate income tax amounting to Rp34,950, which amount is lower than the amount recognized by IMM in its financial statements. IMM charged the unapproved 2009 claim for tax refund amounting to Rp597 to current operations. On the same date, IMM also received the assessment letters on tax underpayment (“SKPKBs”) for IMM’s 2009 income tax articles 21 and 23 and VAT totalling Rp4,512 (including penalties and interest). On May 26 2011, IMM received the refund of its claim for 2009 corporate income tax amounting to Rp30,438, after being offset with above underpayment of IMM’s 2009 income tax articles 21 and 23 and VAT.
7.
OTHER CURRENT FINANCIAL ASSETS - NET
This account consists of the following:
September 30,
December 31,
2011
2010
Short-term investment
25,395
25,395
Less allowance for impairment
25,395
25,395
Net
-
-
Restricted cash and cash equivalents (including US$1,865
in 2011 and US$1,645 in 2010)
30,685
48,165
Others (including US$11 in 2011 and US$70 in 2010)
4,666
4,954
Total
35,351
53,119
8.
PROPERTY AND EQUIPMENT
The details of property and equipment are as follows:
September 30, 2011 (nine months)
Balance
Transactions during the Period
Balance
at Beginning
at End
of Period
Additions
Derecognitions
Reclassifications
of Period
Cost
Landrights
541,087
-
-
1,294
542,381
Buildings
814,191
2,518
-
41,299
858,008
Information technology
equipment
2,501,892
18
(34,297)
251,251
2,718,864
Office equipment
1,776,429
12,749
(17,663)
42,233
1,813,748
Building and leasehold
improvements
11,974,685
-
(65,085)
274,384
12,183,984
12,184,066
Vehicles
24,700
-
(489)
-
24,211
25.008
Cellular technical
equipment
34,850,044
400,956
(1,499,302)
2,686,184
36,437,882
Transmission and cross-
connection equipment
18,329,220
95,281
(34,717)
930,124
19,319,908
FWA technical equipment
1,345,157
-
-
149
1,345,306
Operation and maintenance
center and measurement unit
1,355,263
-
-
77,613
1,432,876
Fixed access network
equipment
1,126,614
-
-
27,246
1,153,860
Properties under
construction and
installation
3,461,884
3,427,639
*
-
(4,331,777)
2,557,746
Total
78,101,166
3,939,161
(1,651,553)
-
80,388,774
Accumulated Depreciation
Buildings
313,721
25,751
-
-
339,472
Information technology
equipment
1,958,337
203,632
(34,297)
-
2,127,672
Office equipment
1,342,743
74,428
(17,663)
-
1,399,508
Building and leasehold
improvements
4,802,990
716,499
(65,085)
-5,454,404
Vehicles
18,646
2,241
(489)
-
20,398
Cellular technical
equipment
15,488,516
2,414,540
(1,061,738)
-
16,841,318
16,841
Transmission and cross-
connection equipment
8,036,060
1,160,545
(34,717)
-
9,161,888
FWA technical equipment
534,842
92,224
-
-
627,066
Operation and maintenance
center and measurement unit
1,093,598
90,079
-
-
1,183,677
Fixed access network
equipment
842,092
50,233
-
-
892,325
Total
34,431,545
4,830,172
(1,213,989)
-
38,047,728
36,589,866
Less Impairment in Value
98,611
-
-
-
98,611
Net Book Value
43,571,010
42,242,435
*Including additional property and equipment purchased from Lintasarta amounting to Rp 17,429 (net of intercompany profit of Rp21,226)
8.
PROPERTY AND EQUIPMENT (continued)
December 31, 2010 (one year)
Balance
Transactions during the Year
Balance
at Beginning
at End
of Year
Additions
Derecognitions
Reclassifications
of Year
Cost
Landrights
504,620
15,977
-
20,490
541,087
Buildings
652,677
4,088
-
157,426
814,191
Information technology
equipment
2,162,426
114
(14,141)
353,493
2,501,892
Office equipment
1,682,984
50,632
(15,016)
57,829
1,776,429
1,701,440
Building and leasehold
improvements
10,924,318
-
(70,346
)
1,120,713
11,974,685
Vehicles
24,389
635
(1,500)
1,176
24,700
25.008
Cellular technical
equipment
31,170,449
158,285
(1,741,072)
5,262,382
34,850,044
Transmission and cross-
connection equipment
16,349,982
205,849
(324,912)
2,098,301
18,329,220
FWA technical equipment
1,284,431
-
(22,070)
82,796
1,345,157
Operation and maintenance
center and measurement unit
1,286,658
-
(1,315)
69,920
1,355,263
Fixed access network
equipment
1,069,005
-
(1,851)
59,460
1,126,614
Properties under
construction and
installation
7,706,513
5,039,357*
-
(9,283,986)
3,461,884
Total
74,818,452
5,474,937
(2,192,223
)
-
78,101,166
Accumulated Depreciation
Buildings
283,781
29,940
-
-
313,721
Information technology
equipment
1,686,303
286,175
(14,141)
-
1,958,337
Office equipment
1,209,518
148,219
(14,994)
1,342,743
Building and leasehold
improvements
3,952,460
920,854
(70,324)
-4,802,990
Vehicles
15,761
3,588
(703
)
-
18,646
Cellular technical
equipment
14,044,917
3,026,386
(1,582,787
)
-
15,488,516
Transmission and cross-
connection equipment
6,925,779
1,435,193
(324,912
)
-
8,036,060
FWA technical equipment
434,990
121,922
(22,070
)
-
534,842
Operation and maintenance
center and measurement unit
959,924
134,989
(1,315
)
-
1,093,598
Fixed access network
equipment
777,601
66,342
(1,851)
-
842,092
Total
30,291,034
6,173,608
(2,033,097
)
-
34,431,545
Less Impairment in Value
98,611
-
-
-
98,611
Net Book Value
44,428,807
43,571,010
*Including additional property and equipment purchased from Lintasarta amounting to Rp 71,423 (net of intercompany loss of Rp11,683)
44
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
8.
PROPERTY AND EQUIPMENT (continued)
Submarine cables represent the Company’s proportionate investment in submarine cable circuits jointly constructed, operated, maintained and owned with other countries, based on the respective contracts and/or the construction and maintenance agreements.
Depreciation expense charged to the consolidated statements of comprehensive income amounted to Rp4,830,172 and Rp4,549,069during the nine months ended September 30, 2011 and 2010, respectively.
Management believes that there is no impairment in asset value or recovery of the impairment reserve as contemplated in PSAK 48 for the current period.
On August 31, 2009, the Company launched its Palapa D Satellite. The Satellite experienced an under-performance of the launch vehicle during the Satellites’ placement to its intended orbital position. Consequently, its orbital lifetime has been reduced. The insurance claim for the partial loss of the Satellite has been made and is recorded as a reduction of the cost of the Satellite. The Satellite has been in operation since November 2009 after going through the process of testing and arranging its orbital position in September and October 2009. On January 4 and 19, 2010, the Company collected the Palapa D Satellite insurance claim amounting to US$58,008 (equivalent to Rp537,657) as a loss compensation for the decrease in the Satellite’s useful life from 15 years to 10.77 years due to the under-performance of the launch vehicle in the Satellite’s orbital process.
As of September 30, 2011, approximately Rp22,118 of property and equipment are pledged as collateral to credit facilities obtained by Lintasarta (Notes 18j and 18l).
As of September 30, 2011, the Group insured its property and equipment (except submarine cables and landrights) for US$254,129 and Rp40,356,551 including insurance amounting to US$132,800 on the Company‘s satellite. Management believes that the sum insured is sufficient to cover possible losses arising from fire, explosion, lightning, aircraft damage and other natural disasters.
The details of the Group’s properties under construction and installation as of September 30, 2011 and December 31, 2010 are as follows:
Percentage of
Estimated Date
Completion
Cost
of Completion
September 30, 2011
Cellular technical equipment
9 - 90
1,595,763
October - December 2011
Transmission and cross-connection equipment
6 - 98
775,880
October - December 2011
Building and leasehold improvements
8 - 99
117,771
October - December 2011
Information technology equipment
60 - 80
53,834
October - December 2011
Others
35 - 95
14,498
October 2011 - July 2012
Total
2,557,746
December 31, 2010
Cellular technical equipment
5 - 99
2,170,612
January - December 2011
Transmission and cross-connection equipment
5 - 99
955,425
January - December 2011
Building and leasehold improvements
6 - 95
242,194
January - December 2011
Others (each below Rp50,000)
5 - 95
93,653
January - December 2011
Total
3,461,884
Borrowing costs capitalized to properties under construction and installation for the nine months ended September 30, 2011 and 2010 amounted to Rp2,933 and Rp15,554, respectively.
8.
PROPERTY AND EQUIPMENT (continued)
For the nine months ended September 30, 2011 and 2010, exchanges and sales of certain property and equipment were made as follows:
2011
2010
Exchanges of Assets
Kalimantan Project (Note 32e)
Carrying amount of assets received
400,956
-
Carrying amount of assets given up
(400,956
)
-
Sumatra and Java Project (Note 32b)
Carrying amount of assets received
19,273
-
Carrying amount of assets given up
(36,608
)
-
Sales of Assets
Proceeds
2,998
1,940
Net book value
-
(466
)
Gain (loss)
(14,337
)
1,474
In the above exchange of assets transactions, the fair values of neither the assets received nor the assets given up could be measured reliably, hence, their values were measured at the carrying amounts of the assets given up.
9.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill arose from the acquisition of ownership in Bimagraha and Satelindo in 2001 and 2002, respectively, and from the acquisition of additional ownership in Lintasarta in 2005, in SMT in 2008 and LMD in 2010.
The details of the other intangible assets arising from the acquisition of Satelindo in 2002 are as follows:
Amount
Spectrum license
222,922
Customer base
- Post-paid
154,220
- Prepaid
73,128
Brand
147,178
Total
597,448
The changes in the goodwill and other intangible assets account for the nine months ended September 30, 2011 and year ended December 31, 2010 are as follows:
2011
2010
Balance at beginning of period - net
1,374,060
1,580,080
Additions:
Non-integrated software
5,326
40,052
Patent
112
-
Amortization of goodwill (Note 2c)
-
(226,380)
Amortization of other intangible assets
(11,183
)
(19,692)
Balance at end of period - net
1,368,315
1,374,060
Goodwill acquired through business combination has been allocated to the cellular business unit, which is also considered as one of the Group’s operating segments.
9.
GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
Goodwill is tested for impairment annually (as at December 31) and when circumstances indicate the carrying value may be impaired. The Company’s impairment test for goodwill is based on fair value less cost to sell (“FVLCTS”) calculation that uses a discounted cash flow model.
Key assumptions used in FVLCTS calculation at December 31, 2010:
Discount rates - The Company has chosen to use weighted average cost of capital (“WACC”) as the discount rate for the discounted cash flow. The estimated WACC applied in determining the recoverable amount of the cellular business unit is between 12% and 14%.
Compounded Annual Growth Rate (“CAGR”) - The CAGR projection for the 5-year budget period of cellular business unit revenue made by management is approximately 12%.
Cost to Sell - As the recoverable amount of the cellular business unit is determined using FVLCTS, the estimated cost to sell the business is based on a certain percentage of the equity value. The estimated cost to sell used for this calculation is at approximately 1.5% of the enterprise value.
The Company considers the relationship between its market capitalization and its book value, among other factors, when reviewing for indicators of impairment. As of September 30, 2011, the market capitalization of the Company was above the book value of its equity. As a result, management does not perform an impairment calculation as of September 30, 2011.
10. LONG-TERM PREPAID RENTALS - NET OF CURRENT PORTION
This account represents mainly the long-term portion of prepaid rentals on sites and towers.
11.
LONG-TERM ADVANCES
This account represents advances to suppliers and contractors for the purchase and construction/ installation of property and equipment which will be reclassified to the related property and equipment accounts upon the receipt of the property and equipment purchased or after the construction/installation of the property and equipment has reached a certain percentage of completion.
12. OTHER NON-CURRENT FINANCIAL ASSETS - NET
This account consists of the following:
September 30,
December 31,
2011
2010
Other long-term investments
116,307
102,707
Less allowance for impairment
113,577
99,977
Net
2,730
2,730
Restrictedcash and cash equivalent (including US$251 in 2011
and US$155 in 2010)
50,412
39,595
Employee loans receivable
15,918
15,679
Others (including US$1,278 in 2011 and US$1,272 in 2010)
22,620
22,401
Sub-total
88,950
77,675
Total
91,680
80,405
45
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
12. OTHER NON-CURRENT FINANCIAL ASSETS - NET (continued)
The other long-term investments - net consist of the following:
a.
Investments in shares of stock accounted under the cost method:
September 30, 2011
Location | Principal Activity | Ownership (%) | Cost/Carrying Value | ||||||||
PT First Media Tbk | Indonesia | Cable television and internet network service provider | 1.07 | 50,000 | |||||||
Pendrell Corporation [previously ICO Global Communication (Holdings) Limited*] | Washington | Satellite service | 0.0068 | 49,977 | |||||||
Asean Cableship Pte. Ltd. (“ACPL”)** | Singapore | Repairs and maintenance of submarine cables | 16.67 | 1,265 | |||||||
Others | 12.80 - 18.89 | 14,966 | |||||||||
Total | 116,208 | ||||||||||
Less allowance for impairment | 113,577 | ||||||||||
Net | 2,631 | ||||||||||
December 31, 2010
PT First Media Tbk | Indonesia | Cable television and internet network service provider | 1.07 | 50,000 | |||||||
ICO Global Communication (Holdings) Limited | Washington | Satellite service | 0.0087 | 49,977 | |||||||
ACPL**
| Singapore | Repairs and maintenance of submarine cables | 16.67 | 1,265 | |||||||
Others | 12.80 - 14.29 | 1,366 | |||||||||
Total | 102,608 | ||||||||||
Less allowance for impairment | 99,977 | ||||||||||
Net | 2,631 | ||||||||||
*
On March 15, 2011, the Company’s ownership in ICO Global Communication (Holdings) Limited was diluted to 0.0068% since the Company did not exercise its right in relation to a right issue conducted by ICO Global Communication (Holdings) Limited. On July 21, 2011, ICO Global Communication changed its name to Pendrell Corporation.
**
The Company received dividend income from its investment in ACPL totaling US$817 (equivalent to Rp7,004) and US$2,140 (equivalent to Rp19,281) for the nine months ended September 30, 2011 and 2010, respectively.
The Company has provided allowance for impairment of its investments in shares of stock accounted for under the cost method amounting to Rp113,577 and Rp99,977 as of September 30, 2011 and December 31, 2010, respectively, which the Company believes is adequate to cover impairment losses on the investments.
b.
Equity securities from BNI of Rp89 and Telkom of Rp10 which are both available for sale as of September 30, 2011 and December 31, 2010.
13.
OTHER NON-CURRENT ASSETS - NET
As of September 30, 2011 and December 31, 2010, this account consists of the following investments which are accounted for under the equity method:
September 30,
December 31,
2011
2010
Investment in an associated company
56,300
56,300
Less allowance for impairment
56,300
56,300
Net
-
-
Others
6,621
8,341
Total
6,621
8,341
14.
SHORT-TERM LOAN
This account represents the following:
September 30,
December 31,
2011
2010
Related party (Note 30)
Mandiri - net of unamortized debt
issuance cost of Rp1,484
298,516
-
On June 21, 2011, the Company entered into a Revolving Time Loan Facility agreement with Mandiri covering a maximum amount of Rp1,000,000 to finance the Company’s operational working capital, capital expenditure and/or refinancing requirements. This facility is available from June 21, 2011 to June 21, 2014 and drawdowns bear interest at 1-month Jakarta Inter-Bank Offered Rate (“JIBOR”) plus 1.4% per annum. Each drawdown matures 3 months from the drawdown date and can be extended for further 3 month periods by submitting a written request for such extension to Mandiri.
On August 2, 2011, the Company made the first drawdown amounting to Rp300,000 from the Revolving Time Loan facility from Mandiri.
Voluntary early repayment is permitted subject to 3 days prior written notice. The Company may early repay the whole or any part of the loan.
Based on the facility agreement, the Company is required to comply with certain covenants such as maintaining financial ratios. As of September 30, 2011, the Company has complied with all financial ratios required to be maintained under this facility agreement.
The amortization of loan issuance cost for the nine months ended September 30, 2011 amounted to Rp151 (Note 28).
15.
PROCUREMENT PAYABLE
This account consists of payables for capital and operating expenditures procured from the following:
September 30,
December 31,
2011
2010
Related parties (Note 30) (including US$234 in 2011 and
US$404 in 2010)
44,059
68,681
Third parties (including US$238,632 in 2011 and US$246,211
in 2010)
3,334,622
3,575,786
Total
3,378,681
3,644,467
The billed amount of procurement payable amounted to Rp491,411 and Rp360,508 as of September 30, 2011 and December 31, 2010, respectively. The unbilled amount of procurement payable amounted to Rp2,887,270 and Rp3,283,959 as of September 30, 2011 and December 31, 2010, respectively.
46
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16.
TAXES PAYABLE
This account consists of the following:
September 30,
December 31,
2011
2010
Estimated corporate income tax payable,
less tax prepayments of Rp78,349 in 2011
and Rp123,281 in 2010
4,412
4,890
Income tax:
Article 4(2)
6,309
14,299
Article 21
12,325
14,032
Article 23
6,402
9,177
Article 25
14,951
18,899
Article 26
23,895
88,787
VAT
10,103
18,107
Others
77
1,254
Total
78,474
169,445
The reconciliation between profit before income tax and estimated taxable income (tax loss) of the Company for the nine months ended September 30, 2011 and 2010 is as follows:
2011
2010
Profit before income tax per consolidated statements of comprehensive
income
1,456,563
873,542
Subsidiaries’ profit before income tax and effect of
inter-company consolidation eliminations
(139,514
)
(147,168
)
Profit before income tax of the Company
1,317,049
726,374
Positive adjustments
Gain on sale and exchange of property and equipment
188,517
-
Employee benefits
41,581
42,188
Donations
20,357
7,272
Amortization of debt and bonds issuance costs,
consent solicitation fees and discount (Notes 14, 18 and 19)
11,737
19,948
Assessments for income taxes and VAT (including penalties)
5,251
82,694
Representation and entertainment
4,711
4,000
Provision for impairment of receivables
2,156
27,305
Accrual of employee benefits - net of realization
-
97,674
Amortization of goodwill and other intangible assets
-
28,632
Provision for termination, gratuity and compensation benefits
of employees - net of realization
-
24,970
Net periodic pension cost
-
13,568
Others
20,798
52,810
Negative adjustments
Depreciation - net
(623,171
)
(1,237,859
)
Realization of accrual of employee benefits - net
(146,819
)-
Equity in net income of investees
(145,966
)
(182,609
)
Amortization of goodwill and other intangible assets
(129,986
)
-
Interest income already subjected to final tax
(33,068
)
(91,044
)
Net periodic pension cost
(19,352
)
-
47
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16. TAXES PAYABLE (continued)
The reconciliation between profit before income tax and estimated taxable income (tax loss) of the Company for the nine months ended September 30, 2011 and 2010 is as follows (continued):
2011
2010
Realization of provision for termination, gratuity and compensation benefits
of employees - net
(14,754
)
-
Amortization of long-term prepaid licenses
(9,941
)
(26,254
)
Loss on sale of property and equipment
-
(10,634
)
Others
(5,365
)
(3,466
)
Estimated taxable income (tax loss) of
the Company - current period
483,735
(424,431
)
Tax loss carryforward at beginning of period
(1,142,061
)
-
Tax loss carryforward at end of period
(658,326
)
(424,431
)
The computation of the income tax expense for the nine months ended September 30, 2011 and 2010 is as follows:
2011
2010
Tax loss carryforward at end of period
(658,326
)
(424,431
)
Income tax expense - current (at statutory tax rates)
Company
-
-
Subsidiaries
82,761
99,859
Total income tax expense - current
82,761
99,859
Income tax expense (benefit) - deferred - effect
of temporary differences at applicable tax rate
Company
Depreciation - net
155,793
309,465
Utilization of tax loss carryforward (tax loss)
120,934
(106,108
)
Realization (accrual) of employee benefits - net
36,705
(24,419
)
Equity in net income of investees
36,491
45,652
Amortization of goodwill and other intangible assets
32,496
(7,158
)
Net periodic pension cost
4,838
(3,392
)
Realization (accrual) of provision for termination,
gratuity and compensation benefits of
employees - net
3,689
(6,243
)
Amortization of long-term prepaid licenses
2,485
6,564
Loss (gain) on sale and exchange of property
and equipment - net
(47,129
)
2,659
Amortization of debt and bonds issuance costs,
consent solicitation fees and discount (Notes 14, 18 and 19)
(2,934
)
(4,987
)
Provision for impairment of receivables - net
(539
)
(6,826
)
Others
(17,800
)
(9,746
)
Net
325,029
195,461
Subsidiaries
(7,386
)
(2,141)
Net income tax expense - deferred
317,643
193,320
Total income tax expense
400,404
293,179
48
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16. TAXES PAYABLE (continued)
The computation of the estimated income tax payable for the nine months ended September 30, 2011 and for the year ended December 31, 2010 is as follows:
September 30,
December 31,
2011
2010
Income tax expense - current
Company
-
-
Subsidiaries
82,761
128,171
Total income tax expense - current
82,761
128,171
Less prepayments of income tax of the Company
Article 22
38,367
52,126
Article 23
5,268
6,810
Article 25
-
28,795
Total prepayments of income tax of the Company
43,635
87,731
Less prepayments of income tax of Subsidiaries
Article 22
-
1,107
Article 23
4,451
3,696
Article 25
142,579
194,309
Total prepayments of income tax of Subsidiaries
147,030
199,112
Total prepayments of income tax
190,665
286,843
Estimated income tax payable
ofSubsidiaries
4,412
4,890
Claims for tax refund (presented as part of “Prepaid Taxes”)
Company
43,635
87,731
Subsidiaries
68,681
75,831
Total
112,316
163,562
The reconciliation between the income tax expense calculated by applying the applicable tax rate of 25% to the profit before income tax and the income tax expense as shown in the consolidated statements of comprehensive income for the nine months ended September 30, 2011 and 2010 is as follows:
2011
2010
Profit before income tax per consolidated statements
of comprehensive income
1,456,563
873,542
Income tax expense at the applicable tax rate
364,141
218,386
Company’s equity in Subsidiaries’ profit before income tax
and reversal of
inter-company consolidation eliminations
42,505
51,160
49
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16. TAXES PAYABLE (continued)
2011
2010
Tax effect on permanent differences
Employee benefits
12,145
11,703
Donations
5,092
1,819
Representation and entertainment
1,480
1,512
Assessment for income taxes and VAT (including penalties)
1,313
20,706
Interest income already subjected to final tax
(19,688
)
(28,833)
Others
(12,913
)
(537
)
Adjustment due to tax audit and others
6,329
17,263
Income tax expense per consolidated statements of
comprehensive income
400,404
293,179
The tax effects of significant temporary differences between financial and tax reporting of the Company which are outstanding as of September 30, 2011 and December 31, 2010 are as follows:
September 30,
December 31,
2011
2010
Deferred tax assets
Accrual of employee benefits - net
194,711
235,104
Tax loss carryforward
164,581
285,515
Allowance for impairment of receivables
118,734
118,195
Allowance for impairment of investments in associated
company and
other long-term investments
42,469
39,069
Pension cost
17,305
22,143
Allowance for impairment of short-term investment
6,349
6,349
Others
1,555
3,300
Total
545,704
709,675
Deferred tax liabilities
Property and equipment
2,328,822
2,220,158
Investments in subsidiaries/associated company - net of
amortization of goodwill and other intangible assets
282,486
229,239
Long-term prepaid licenses
16,048
13,562
Deferred debt and bonds issuance costs, consent solicitation fees
and discount
7,592
10,526
Difference in transactions of equity changes in associated company
1,460
1,460
Others
659
659
Total
2,637,067
2,475,604
Deferred tax liabilities - net
2,091,363
1,765,929
50
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
16. TAXES PAYABLE (continued)
The breakdown by entity of the deferred tax assets and liabilities outstanding as of September 30, 2011 and December 31, 2010 is as follows:
September 30, 2011
December 31, 2010
Deferred Tax
Deferred Tax
Deferred Tax
Deferred Tax
Assets
Liabilities
Assets
Liabilities
Company
-
2,091,363
-
1,765,929
Subsidiaries
Lintasarta
81,154
-
77,755
-
IMM
20,165
-
17,263
-
SMT
902
-
-
1,597
APE
-
5,873
-
4,383
ISPL
-
351
-
428
Total
102,221
2,097,587
95,018
1,772,337
The deferred tax assets of Lintasarta relate mainly to the deferred tax on the temporary difference in the recognition of depreciation on property and equipment.
The significant temporary differences on which deferred tax assets have been computed are not deductible for income tax purposes until the accrued employee benefits are paid, the allowance for impairment of receivables is realized upon the write-off of the receivables after fulfilling certain requirements under the Income Tax Law, the allowance for impairment of investments in associated company and other long-term investments is realized upon sale of the investments and the pension cost is paid.
The significant deferred tax liabilities relate to the differences in the book and tax bases of property and equipment, investments in subsidiaries/associated company, long-term prepaid licenses, debt and bonds issuance costs, consent solicitation fees and discount.
The Company provides for deferred tax liabilities and deferred tax assets relating to the book-versus-tax-basis differences in its investment in domestic subsidiaries as the Company believes that for certain subsidiaries the investment will be recovered through the sale of the shares which is a taxable transaction and for certain subsidiaries the differences will be deductible from ordinary income as a result of a merger.
On September 17, 2010, the Company received STPs from the DGT for the underpayment of the Company’s 2008 and 2009 income tax article 26 totalling Rp80,018 (including interest). On October 13, 2010, the Company submitted cancellation letters to the Tax Office regarding such STPs. Subsequently, on November 16, 2010, the Company was required to pay a certain portion of these STPs by using the approved tax refund received on the Company’s corporate Income Tax for fiscal year 2005 amounting to Rp38,155 (Note 6). On January 7, 2011, the Company paid the remaining amount of Rp41,863 on the underpayment of the Company’s 2008 and 2009 income tax article 26 based on STPs from the DGT. On April 11, 2011, the Company received a letter from the Tax Office which declined the request for cancellation of such STPs. On May 5, 2011, the Company submitted an appeal letter to the Tax Court concerning these STPs. As of October 25 2011, the Company has not yet received any decision from the Tax Court on such appeal.
On April 21, 2011, the Company received SKPKB from the DGT for the Company’s VAT for the period January - December 2009 totalling Rp182,800 (including penalties). The Company accepted a part of the corrections amounting to Rp4,160 which was charged to current operations (Note 6). On July 15, 2011, the Company paid the remaining under payment of the VAT for period January - December 2009 amounting to Rp178,640. On July 19, 2011, the Company submitted an objection letter to the Tax Office regarding the remaining correction on the Company’s VAT for the period January - December 2009. As of October 25, 2011, the Company has not yet received any decision from the Tax Office on such objection letter.
16. TAXES PAYABLE (continued)
The tax losses carryover of SMT and the Company as of September 30, 2011 can be carried forward through 2016 based on the following schedule:
Year of Expiration
Amount
2012
30,205
2013
26,660
2014
31,901
2015
709,098
2016
19,146
Total
817,010
17.
ACCRUED EXPENSES
This account consists of the following:
September 30,
December 31,
2011
2010
Network repairs and maintenance
315,092
265,428
Marketing
236,567
120,092
Interest
201,680
339,957
Employee benefits (Notes 22 and 29)
180,826
216,732
Dealer incentives (Note 2k)
131,350
125,836
Utilities
68,064
85,650
Universal Service Obligation (“USO”) (Notes 30 and 34)
59,495
59,899
Link
45,779
31,111
Rental
45,154
28,090
Blackberry access fee
35,727
20,679
Radio frequency fee (Notes 30 and 34)
29,752
195,686
Concession fee (Notes 30 and 34)
26,785
38,005
Consultancy fees
24,550
65,288
General and administration
18,958
27,706
Others (each below Rp20,000)
86,593
90,726
Total
1,506,372
1,710,885
18.
LOANS PAYABLE
This account consists of the following:
September 30,
December 31,
2011
2010
Third parties - net of unamortized debt issuance cost and consent
solicitation fees of Rp158,964 in 2011 and Rp189,979 in 2010;
unamortized debt discount of Rp13,810 in 2011 and Rp19,267
in 2010
8,329,416
9,553,906
Related party (Note 30)
Mandiri - net of unamortized debt issuance cost and consent
solicitation fees of Rp1,536 in 2011 and Rp2,955 in 2010
998,464
1,297,045
Total loans payable
9,327,880
10,850,951
51
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
18.
LOANS PAYABLE (continued)
September 30,
December 31,
2011
2010
Less current maturities (net of unamortized debt issuance cost
and consent solicitation fees of Rp3,046 in 2011 and
Rp373 in 2010)
Third parties
2,903,521
2,884,147
Related party
998,464
300,000
Total current maturities
3,901,985
3,184,147
Long-term portion
Third parties
5,425,895
6,669,759
Related party
-
997,045
Total long-term portion
5,425,895
7,666,804
The loans from third parties consist of the following:
September 30,
December 31,
2011
2010
Syndicated U.S. Dollar Loan Facility - net of unamortized debt
issuance cost and consent solicitation fees of Rp14,837
in 2011 and Rp27,122 in 2010
2,962,926
4,018,828
AB Svensk Exportkredit, Sweden with Guarantee from
Exportkreditnamnden - net of unamortized debt issuance
cost of Rp28,865 in 2011 and Rp27,593 in 2010
2,167,432
1,972,905
HSBC France - net of unamortized debt issuance cost
and consent solicitation fees of Rp110,201 in 2011 and
Rp129,167 in 2010
1,311,267
1,500,434
BCA - net of unamortized debt issuance cost and consent
solicitation fees of Rp1,510 in 2011 and Rp2,903 in 2010
998,490
1,297,097
Goldman Sachs International
Principal, net of unamortized debt discount of Rp13,810
in 2011 and Rp19,267
in 2010
420,490
415,033
Foreign Exchange (FX) Conversion Option
51,542
54,595
BCA Revolving Time Loan - net of unamortized debt
issuance cost of Rp1,338 in 2011
198,662
-
9-Year Commercial Loan - net of unamortized debt issuance
cost and consent solicitation fees of Rp2,213 in 2011 and
Rp2,821 in 2010
188,624
203,805
Investment Credit Facility 6 from CIMB Niaga
29,983
52,483
Finnish Export Credit Ltd. - net of unamortized debt issuance
cost and consent solicitation fees of Rp373 in 2010
-
33,793
Investment Credit Facility 5 from CIMB Niaga
-
4,933
Total
8,329,416
9,553,906
Less current maturities (net of unamortized debt issuance
costs and consent solicitation fees totaling Rp1,510 in 2011
and Rp373 in 2010)
2,903,521
2,884,147
Long-term portion
5,425,895
6,669,759
52
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
18.
LOANS PAYABLE (continued)
The details of the loans from the related party and third parties are as follows:
Counterparties | Loan Type | Maturity | Amount | Interest Structure | Early Repayment |
a. Mandiri* | § 5-year unsecured credit facility 1 § Loan drawdowns are payable annually | September 18, 2012 | Rp2,000,000 | § Year 1: 9.75% p.a. § Year 2: 10.5% p.a. § Years 3-5: Average 3-month JIBOR + 1.5% p.a. § Payable quarterly | § Without penalty if the repayment is made after the 24th month after the agreement date subject to 7 days’ prior written notice § With penalty of 2% of the prepaid amount for repayment prior to the 24th month after the agreement date |
a. Syndicated U.S. Dollar Loan Facility - 13 Financial Institutions | § 5-year unsecured credit facility § Loan drawdowns are payable semi-annually | June 12, 2013 | US$450,000 | § USD London Inter-Bank Offered Rate (“LIBOR”) + 1.9% p.a. (onshore lenders); USD LIBOR + 1.85% p.a. (off- shore lenders) § Payable semi-annually | § Permitted only after the 6th month from the date of loan agreement subject to 15 days’ prior written notice (in the minimum amount of US$10,000 and in an amount divisible by US$1,000) |
a. AB Svensk Exportkredit (“SEK”), Sweden with Guarantee from Export kreditnamnden (“EKN”) | § Credit facilities consisting of Facilities A,B and C with maximum amounts of US$100,000, US$155,000 and US$60,000, respectively § Loan drawdowns are payable semi-annually | May 31, 2016 for Facility A, February 28, 2017 for Facility B and November 30, 2017 for Facility C | US$315,000 | § Facility A: Margin of 0.25%, LIBOR, SEK Funding Cost of 1.05% and EKN Premium Margin of 1.58% § Facility B: Margin of 0.05%, Commercial Interest Reference Rate (“CIRR”) and EKN Premium Margin of 1.61% § Facility C: Margin of 0.05%, CIRR and EKN Premium Margin of 1.61%. § Payable semi-annually | § Permitted only in proportionate amount for each of Facilities A, B and C, after the last day of the availability period and on a repayment date subject to 20 days’ prior written notice § In minimum amount of US$5,000 and in an amount divisible by US$500 § Any repayment shall satisfy the obligations of loan repayment in inverse chronological order. |
a. HSBC France | § 12 year - COFACE term facility § Payable in twenty semi-annual installments | November 27, 2019 | US$157,243 | § 5.69% p.a. § Payable semi-annually | § Permitted with a corresponding proportionate voluntary prepayment under the SINOSURE Facility after the last day of the availability period and on a repayment date subject to 30 days’ prior written notice § In minimum amount of US$10,000 and in an amount divisible by US$1,000 § Any repayment shall satisfy the obligations of loan repayment in inverse chronological order. |
* related party (Note 30)
18.
LOANS PAYABLE (continued)
Counterparties | Loan Type | Maturity | Amount | Interest Structure | Early Repayment | |
e. HSBC France | § 12 year - SINOSURE term facility § Payable in twenty semi-annual installments | November 27, 2019 | US$44,200 | § USD LIBOR + 0.35% p.a. § Payable semi-annually | § Permitted with a corresponding proportionate voluntary prepayment under the COFACE Facility after the last day of the availability period and on a repayment date subject to 30 days’ prior written notice § In minimum amount of US$10,000 and in an amount divisible by US$1,000 § Any repayment shall satisfy the obligations of loan repayment in inverse chronological order. | |
f. BCA | § 5-year unsecured credit facility 1 § Loan drawdowns are payable annually | August 28, 2012 | Rp2,000,000 | § Year 1: 9.75% p.a. § Year 2: 10.5% p.a. § Years 3-5: 3-month JIBOR + 1.5% p.a. § Payable quarterly | § Without penalty if the repayment is made after the 24th month after the agreement date subject to 7 days’ prior written notice § With penalty of 2% of the prepaid amount for repayment prior to the 24th month after the agreement date. | |
g. Goldman Sachs International (“GSI”) | § Investment loan § Provides an “FX Conversion Option” for GSI to convert the loan payable into U.S. dollar loan of US$50,000 on May 30, 2012 (“FX Conversion Option”). § Fair value of FX Conversion Option as of September 30, 2011 and December 31, 2010 amounting to US$5,841.77 (equivalent to Rp50,542) and US$6,072.20 (equivalent to Rp54,595), respectively. | May 30, 2013 | Rp434,300 | § 8.75% p.a § Payable quarterly § If GSI takes FX Conversion Option, starting May 30, 2012, the loan will bear interest at the fixed annual rate of 6.45% applied on the US$50,000 principal. | § Certain changes affecting withholding taxes in the United Kingdom or Indonesia § Default under Guaranteed Notes due 2012. § Default under the Company’s USD Notes and IDR Bonds § Redemption, purchase or cancellation of the Guaranteed Notes Due 2012 and there are no USD Indosat Notes outstanding upon such redemption, purchase or cancellation. § Change of control in the Company | |
18.
LOANS PAYABLE (continued)
Counterparties | Loan Type | Maturity | Amount | Interest Structure | Early Repayment |
h. BCA | § The revolving time loan with maximum amount of Rp1,000,000 § Each drawdown matures 1 month from the drawdown date. Subsequently, on August 9, 2011, the Company obtained an approval from BCA to amend the maturity date to become February 10, 2014 | February 10, 2014 | Rp200,000 | § JIBOR + 1.4% p.a. § Payable monthly | § Permitted subject to 1 day prior written notice § The Company may repay the whole or any part of the loan. |
i. HSBC Jakarta Branch, CIMB Niaga and Bank of China Limited Jakarta Branch | § 9-year unsecured commercial facility § Payable in fifteen semi-annual payments after 24 months from the date of loan agreement. For the 1st five installments: US$1,351.85 each; and US$2,027.78 each for the remaining installments thereafter | November 27, 2016 | US$27,037 | § USD LIBOR + 1.45% p.a. § Payable semi-annually | § Permitted only on each repayment date after the first repayment date subject to 30 days’ prior written notice § In minimum amount of US$5,000 and in an amount divisible by US$1,000 § Any prepayment shall satisfy the obligations of loan repayment proportionately. |
j. CIMB Niaga | § Investment credit facility 6 obtained by Lintasarta § Payable quarterly | August 24, 2012 | Rp75,000 | § 14.5% p.a., subject to change by CIMB Niaga depending on the market condition § Payable quarterly | § Permitted only on interest payment date subject to 15 days’ prior written notice. Lintasarta may repay the whole or any part of the loan before the due date only by using the fund from Lintasarta’s operational activities. Repayment using the fund from loans obtained from other parties is allowed with penalty determined by CIMB Niaga. § The loan is collateralized by all equipment (Note 8) purchased from the proceeds of credit facility. |
53
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
18.
LOANS PAYABLE (continued)
Counterparties | Loan Type | Maturity | Amount | Interest Structure | Early Repayment |
k. Finnish Export Credit Ltd. | § 5-year credit facility § Payable semi-annually | May 12, 2011 | US$38,000 | § 4.15% p.a. § Payable semi-annually | § Permitted only after 60 days of the loan agreement subject to 15 days’ prior written notice (in the minimum amount of US$10,000 and in an amount divisible by US$1,000). § In May 2011, this loan was fully paid. |
l. CIMB Niaga | § Investment credit facility 5 obtained by Lintasarta § Payable quarterly | January 10, 2011 | Rp50,000 | § 1-month SBI + 2.25% p.a. § Payable quarterly | § Permitted only on interest payment date subject to 13 days’ prior written notice. Lintasarta may repay the whole or any part of the loan before the due date only by using the fund from Lintasarta’s operational activities. Repayment using the fund from loans obtained from other parties is allowed with 1% penalty of the early repaid amount. § The loan is collateralized by all equipment (Note 8) purchased from the proceeds of credit facility. § In January 2011, this loan was fully paid. |
54
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
18.
LOANS PAYABLE (continued)
The scheduled principal payments from 2012 of all the loans payable as of September 30, 2011 are as follows:
Twelve months ending September 30,
2016 and
2012
2013
2014
2015
thereafter Total
In rupiah
Mandiri
1,000,000
-
-
-
-1,000,000
BCA
1,000,000
-
-
-
-1,000,000
CIMB Niaga
29,983
-
-
-
-29,983
GSI
-
434,300
-
-
-434,300
BCA - revolving
time loan
-
-
200,000
-
-
200,000
Sub-total
2,029,983
434,300
200,000
-- 2,664,283
In U.S. dollar
Syndicated U.S. Dollar
Loan facility
(US$337,500)
1,270,512
1,707,251
-
-
-2,977,763
SEK, Sweden
(US$248,928.57)
397,035
397,035
397,035
397,035608,1572,196,297
HSBC France
(US$161,109.35)
177,683
177,683
177,683
177,683710,736
1,421,468
9-Year Commercial
Facility
(US$21,629.60)
29,818
35,782
35,782
35,78253,673190,837
GSI (US$5,841.77)
-
51,542
-
-
-51,542
Sub-total
1,875,048
2,369,293
610,500
610,5001,372,566
6,837,907
Total
3,905,031
2,803,593
810,500
610,500
1,372,566
9,502,190
Less:
- unamortized debt issuance costs and consent solicitation fees
(160,500
)
- unamortized debt discount
(13,810)
Net
9,327,880
The total amortization of debt issuance, discount and consent solicitation fees on the loans for the nine months ended September 30, 2011 and 2010 amounted to Rp48,217 and Rp51,299 respectively (Note 28).
As of September 30, 2011 and December 31, 2010, the Group has complied with all financial ratios required to be maintained under the loan agreements.
19.
BONDS PAYABLE
This account consists of the following:
September 30,December 31,
2011
2010
a.
Guaranteed Notes Due 2020 - net of unamortized notes
issuance cost of Rp60,123 in 2011 and
Rp64,885 in 2010;
and unamortized notes discount of Rp26,972 in 2011
and Rp29,666 in 2010
5,647,855
5,749,599
b.
Fifth Indosat Bonds in Year 2007 with Fixed Rates - net of
unamortized bonds issuance cost and consent solicitation
fees of Rp9,605 in 2011 and
Rp11,041 in 2010
2,590,395
2,588,959
c.
Seventh Indosat Bonds in Year 2009 with Fixed Rates - net of
unamortized bonds issuance cost of Rp4,682 in 2011 and
Rp5,362 in 2010
1,295,318
1,294,638
19.
BONDS PAYABLE (continued)
September 30,
December 31,
2011
2010
d.
Sixth Indosat Bonds in Year 2008 with Fixed Rates - net of
unamortized bonds issuance cost and consent solicitation
fees of Rp4,073 in 2011 and Rp5,414 in 2010
1,075,927
1,074,586
e.
Indosat Sukuk Ijarah III in Year 2008 - net of unamortized
bonds issuance cost and consent solicitation fees of
Rp1,825 in 2011 and Rp2,625 in 2010
568,175
567,375
f.
Indosat Sukuk Ijarah II in Year 2007 - net of unamortized
bonds issuance cost and consent solicitation fees of
Rp1,226 in 2011 and Rp1,517 in 2010
398,774
398,483
g. Second Indosat Bonds in Year 2002 with Fixed and Floating
Rates - net of unamortized consent solicitation fees
of Rp650 in 2011and Rp652 in 2010
199,350
199,348
h.
Indosat Sukuk Ijarah IV in Year 2009 - net of unamortized
bonds issuance cost of Rp785 in 2011 and Rp873 in 2010
199,215
199,127
i.
Limited Bonds II issued by Lintasarta*
25,000
25,000
j.
Limited Bonds I issued by Lintasarta**
16,989
16,989
k.
Fourth Indosat Bonds in Year 2005 with Fixed Rate - net of
unamortized bonds issuance cost and consent solicitation
fees of Rp1,382
-
813,618
l.
Indosat Syari’ah Ijarah Bonds in Year 2005 - net of unamortized
bonds issuance cost and consent solicitation fees of Rp487
-
284,513
Total bonds payable
12,016,998
13,212,235
Less current maturities (net of unamortized bonds
issuance
cost and consent solicitation fees
totalling Rp1,869 in 2010)
41,989
1,098,131
Long-term portion
11,975,009
12,114,104
*
after elimination of Limited Bonds II amounting to Rp35,000 issued to the Company
**
after elimination of Limited Bonds I amounting to Rp9,564 issued to the Company
55
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
19.
BONDS PAYABLE (continued)
Bond | Nominal Amount | Interest | Maturity | Remarks |
a. Guaranteed Notes Due 2020 | US$650,000 | § 7.375% p.a. § Payable semi-annually | July 29, 2020 | The notes are redeemable at the option of IPBV: § At any time on or after July 29, 2015. § Prior to July 29, 2013, IPBV may redeem up to a maximum of 35% of the original aggregate principal amount. § At any time, upon not less than 30 days nor more than 60 days’ prior notice, at a price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest to (but not including) the redemption date and any additional amounts, in the event of certain changes affecting withholding taxes in Indonesia and the Netherlands. § Upon a change in control of IPBV, the holder of the notes has the right to require IPBV to repurchase all or any part of such holder’s notes. § Based on latest rating reports (released in December 2010, September 2011 and July 2011), the notes have BB (stable outlook), Ba1 (stable outlook) and BBB- (positive outlook) ratings from Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s) and Fitch Ratings (“Fitch”), respectively. |
a. Fifth Indosat Bonds in Year 2007 | ||||
§ Series A | Rp1,230,000 | § 10.20% p.a. § Payable quarterly | May 29, 2014 | § The Company has option to buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price temporarily or as an early settlement. § Based on the latest rating report released in October 2010, the bonds haveidAA+ (stable outlook) rating from PT Pemeringkat Efek Indonesia (“Pefindo”). |
§ Series B | Rp1,370,000 | § 10.65% p.a. § Payable quarterly | May 29, 2017 | |
a. Seventh Indosat Bonds in Year 2009 | ||||
§ Series A | Rp700,000 | § 11.25% p.a. § Payable quarterly | December 8, 2014 | § The Company has option to buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price temporarily or as an early settlement. § Based on the latest rating report released in October 2010, the bonds haveidAA+ (stable outlook) rating from Pefindo. |
§ Series B | Rp600,000 | § 11.75% p.a. § Payable quarterly | December 8, 2016 | |
19.
BONDS PAYABLE (continued)
Bond | Nominal Amount | Interest | Maturity | Remarks |
d. Sixth Indosat Bonds in Year 2008 | ||||
§ Series A | Rp760,000 | § 10.25% p.a. § Payable quarterly | April 9, 2013 | § The Company has option to buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price temporarily or as an early settlement. § Based on the latest rating report released in October 2010, the bonds haveidAA+ (stable outlook) rating from Pefindo. |
§ Series B | Rp320,000 | § 10.80% p.a. § Payable quarterly | April 9, 2015 | |
d. Indosat Sukuk Ijarah III in Year 2008 (“Sukuk Ijarah III”) | Rp570,000 | § Bondholders are entitled to annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp58,425, payable on a quarterly basis starting July 9, 2008 up to April 9, 2013. | April 9, 2013 | § The Company has option to buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price. § Based on the latest rating report released in October 2010, the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo. |
d. Indosat Sukuk Ijarah II in Year 2007 (“Sukuk Ijarah II”) | Rp400,000 | § Bondholders are entitled to annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp40,800, payable on a quarterly basis starting August 29, 2007 up to May 29, 2014. | May 29, 2014 | § The Company has option to buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price. § Based on the latest rating report released in October 2010, the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo. |
d. Second Indosat Bonds in Year 2002 - Series B | Rp200,000 | § 16% p.a. § Payable quarterly | November 6, 2032 | § The Company has buyback option on the 10th, 15th, 20th and 25th anniversaries of the bonds at 101% of the bonds’ nominal value and the bondholder has sell option if the rating of the bonds decreases toidAA- or lower or on the 15th, 20th and 25th anniversaries of the bonds. § Based on the latest rating report released in October 2010, the bonds haveidAA+ (stable outlook) rating from Pefindo. |
h. Indosat Sukuk Ijarah IV in Year 2009 (“Sukuk Ijarah IV”) | ||||
§ Series A | Rp28,000 | § Bondholders are entitled to annual fixed ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp3,150, payable on a quarterly basis starting March 8, 2010 up to December 8, 2014. | December 8, 2014 | § The Company has option to buy back part or all of the bonds, after the 1st anniversary of the bonds, at market price. § Based on the latest rating report released in October 2010, the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo. |
§ Series B | Rp172,000 | § Bondholders are entitled to annual fixed ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp20,210, payable on a quarterly basis starting March 8, 2010 up to December 8, 2016. | December 8, 2016 | |
19.
BONDS PAYABLE (continued)
Bond | Nominal Amount | Interest | Maturity | Remarks |
i. Limited Bonds II issued by Lintasarta (amended on August 25, 2009) | Rp66,150, with the remaining amount of Rp60,000 since June 14, 2009 | § Average 3-month rupiah time deposit rates with Mandiri, BNI, BRI and BTN, plus a fixed premium of 3% (The maximum limit of floating rates was 19% and the minimum limit was 11% p.a. and starting June 14, 2009, the minimum limit increased to 12.75%.) § Payable quarterly | June 14, 2009 extended to June 14, 2012 | - |
i. Limited Bonds I issued by Lintasarta (amended on August 25, 2009) | Rp34,856, with the remaining amount of Rp26,553 since June 2, 2009 | § Average 3-month rupiah time deposit rates with Mandiri, BNI, BRI and BTN, plus a fixed premium of 3% (The maximum limit of floating rates was 19% and the minimum limit was 11% p.a. and starting June 14, 2009, the minimum limit increased to 12.75%.) § Payable quarterly | June 2, 2009 extended to June 2, 2012 | - |
k. Fourth Indosat Bonds in Year 2005 | Rp815,000 | § 12% p.a. § Payable quarterly | June 21, 2011 | § The Company has early settlement option on the 4th anniversary of the bonds at 100% of the bonds’ nominal value and buy-back option after the 1st anniversary of the bonds at market price temporarily or as an early settlement. § Based on the latest rating report released in March 2011, the bonds haveidAA+ (stable outlook) rating from Pefindo. § On June 21, 2011, the Company paid these bonds in full. |
k. Indosat Syari’ah Ijarah Bonds in Year 2005 (“Syari’ah Ijarah Bonds”) | Rp285,000 | § Bondholders are entitled to annual fixed Ijarah return (“Cicilan Imbalan Ijarah”) totalling Rp34,200, payable on a quarterly basis starting September 21, 2005 up to June 21, 2011. | June 21, 2011 | § The Company has early settlement option on the 4th anniversary of the bonds at 100% of the bonds’ nominal value and buy-back option after the 1st anniversary of the bonds at market price temporarily or as an early settlement. § Based on the latest rating report released in March 2011, the bonds haveidAA(sy)+ (stable outlook) rating from Pefindo. § On June 21, 2011, the Company paid these bonds in full. |
56
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
19.
BONDS PAYABLE (continued)
The scheduled principal payments of all the bonds payable outstanding as of September 30, 2011 are as follows:
Twelve months ending September 30,
2016 and
2012
2013
2014
2015
thereafter*
Total
In U.S. dollar
Guaranteed Notes *
Due 2020
(US$650,000)
-
-
-
-
5,734,9505,734,950
In Rupiah
Fifth Indosat Bonds *
-
-
1,230,000
-
1,370,0002,600,000
Seventh Indosat Bonds*
-
-
-
700,000
600,0001,300,000
Sixth Indosat Bonds*
-
760,000
-
320,000
-
1,080,000
Sukuk Ijarah III *
-
570,000
-
-
-570,000
Sukuk Ijarah II *
-
-
400,000
-
-
400,000
Second Indosat Bonds*
-
-
-
-
200,000
200,000
Sukuk Ijarah IV *
-
-
-
28,000
172,000200,000
Limited Bonds II
25,000
-
-
-
-25,000
Limited Bonds I
16,989
-
-
-
-16,989
Sub-total
41,989
1,330,000
1,630,000
1,048,000
2,342,0006,391,989
Total
41,989
1,330,000
1,630,000
1,048,0008,076,95012,126,939
Less:
-
unamortized notes issuance cost
(60,123)
-
unamortized notes discount
(26,972)
-
unamortized bonds issuance costs and consent solicitation fees
(22,846
)
Net
12,016,998
*
Refer to previous discussion on early repayment options for each bond/note.
All bonds are neither collateralized by any specific Company assets nor guaranteed by other parties. All of the Company’s assets, except for the assets that have been specifically used as security to its other creditors, are used as pari-passu security to all of the Company’s other liabilities including the bonds.
The total amortization of bonds issuance cost, consent solicitation fees, notes issuance cost and discount for the nine months ended September 30, 2011 and 2010 amounted to Rp13,963 and Rp23,388, respectively (Note 28).
As of September 30, 2011 and December 31, 2010, the Group has complied with all financial ratios required to be maintained under the Notes Indenture and Trustee Agreements.
57
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
20. DERIVATIVES
The Company entered into several swap and forward contracts. Listed below is information related to the contracts and their fair values (net of credit risk adjustment) as of September 30, 2011 and December 31, 2010:
Fair Value (Rp)
Notional
September 30, 2011
December 31, 2010
Amount
(US$)
Receivable
Payable
ReceivablePayable
Cross Currency Swap Contracts:
a.
Goldman Sachs International (“GSI”) (1)
100,000
-
-
--
b.
GSI(1)
25,000
-
-
--
c.
GSI(4)
75,000
-
-
50,866-
d.
Standard Chartered (“StandChart”)
25,000
-
9,709
-12,055
e.
StandChart
25,000
-
273
-1,731
f.
StandChart
25,000
10,632
-
9,443-
g.
HSBC, Jakarta Branch(2)
25,000
-
-
--
h.
Merrill Lynch International Bank Limited,
London Branch (“MLIB”)(5)
50,000
-
-
-2,234
i.
MLIB
25,000 with
decreasing amount
3,280
-
2,154
-
j.
MLIB(6)
25,000
-
-
3,778-
k.
Development Bank of Singapore (“DBS”)
25,000 with
decreasing amount
3,842
-
3,093
-
l.
GSI(3)
84,000
-
-
--
Sub-total
17,754
9,982
69,33416,020
Interest Rate Swap Contracts:
m.
HSBC, Jakarta Branch
27,037 with
decreasing amount
-
16,165
-13,100
n.
HSBC, Jakarta Branch
44,200 with
decreasing amount
-
33,997
-29,027
o.
GSI
100,000
-
81,024
-90,273
p.
DBS
25,000 with
decreasing amount
-
7,011
-
9,238
q.
DBS
25,000 with
decreasing amount
-
6,254
-
9,343
r.
Bank of Tokyo MUFJ (“BTMUFJ”)
25,000 with
decreasing amount
-
4,644
-
6,656
s.
BTMUFJ
25,000 with
decreasing amount
-
4,183
-
5,885
t.
BTMUFJ
25,000 with
decreasing amount
-
3,832
-
5,297
u.
StandChart
40,000 with
decreasing amount
-
5,014
-
6,814
v.
DBS
26,000 with
decreasing amount
-
3,101
-
4,966
w.
DBS
26,000 with
decreasing amount
-
2,748
-
4,303
x.
BTMUFJ
36,500 with
decreasing amount
-
3,704
-
7,347
y.
International Netherlands Group (“ING”)
Bank N.V.
25,000 with
decreasing amount
-
1,477
-
4,014
z.
ING Bank N.V.
(7)
33,500
-
-
-3,120
Sub-total
-
173,154
-199,383
(1)
contract entered into in May 2005 and settled in November 2010
(2)
contract entered into in August 2006 and settled in November 2010
(3)
contract entered into in December 2008 and settled in November 2010
(4)
contract entered into in August 2005 and terminated in June 2011
(5)
contract entered into in August 2008 and terminated in June 2011
(6)
contract entered into in September 2008 and terminated in June 2011
(7)
contract entered into in April 2009 and settled in June 2011
58
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
20. DERIVATIVES (continued)
Fair Value (Rp)
Notional
September 30, 2011
December 31, 2010
Amount
(US$)
Receivable
Payable
ReceivablePayable
Currency Forward Contracts:
aa.
JP Morgan
10,000
2,939
-
--
ab.
DBS
20,000
7,056
-
--
ac.
Deutsche Bank
20,000
11,970
-
--
ad.
Deutsche Bank
10,000
6,447
-
--
ae.
JP Morgan
10,000
3,272
-
--
af.
StandChart
5,000
2,971
-
--
ag.
JP Morgan
10,000
3,547
-
--
ah.
PT Danareksa (Persero) (“Danareksa”)
5,000
1,269
-
--
ai.
JP Morgan
5,000
1,886
-
--
aj.
StandChart
5,000
3,014
-
--
ak.
JP Morgan
5,000
2,111
-
--
al.
HSBC
5,000
2,431
-
--
am.
HSBC
5,000
2,443
-
--
an.
JP Morgan
5,000
2,213
-
-
-
ao.
HSBC
1,000
471
-
-
-
ap.
HSBC
3,000
1,412
-
-
-
aq.
HSBC
10,000
3,702
-
-
-
ar.
JP Morgan
2,000
664
-
-
-
as.
StandChart
3,000
1,775
-
-
-
at.
JP Morgan
9,500
3,180
-
-
-
au.
HSBC
6,000
2,309
-
-
-
av.
HSBC
7,500
2,879
-
-
-
aw.
JP Morgan
13,750
4,489
-
-
-
ax.
StandChart
7,000
4,363
-
--
ay.
StandChart
6,600
4,101
-
-
-
az.
StandChart
8,000
5,035
-
-
-
ba.
DBSS
10,000
7,166
-
-
-
bb.
ING
7,000
4,807
-
-
-
bc.
DBS
7,000
5,036
-
-
-
bd.
DBS
10,000
7,475
-
-
-
be.
JP Morgan
10,000
6,748
-
-
-
bf.
HSBC
10,000
3,909
-
-
-
bg.
ING
10,000
6,981
-
-
-
bh.
ING
13,000
9,320
-
-
-
bi.
DBS
13,000
9,719
-
-
-
bj.
ING
13,500
9,410
-
-
-
bk.
ING
10,000
7,149
-
-
-
bl.
ING
10,000
7,121
-
-
-
bm.
GS
I
8,000
5,658
-
-
-
bn.
GS
I
13,000
9,316
-
-
-
bo.
Royal Bank of Scotland (“RBS”)
12,000
8,191
-
--
bp.
GS
I
12,000
8,767
-
-
-
bq.
GS
I
12,500
8,992
-
-
-
Sub-total
213,714
-
-
-
Total
231,468
183,136
69,334215,403
The net changes in fair value of the swap contracts, currency forward contracts and embedded derivative (Note 18g), swap income or cost, termination income or cost, and settlement of derivative instruments totalling Rp89,998 and (Rp378,431) in 2011 and 2010, respectively, were credited or charged to “Gain (Loss) on Change in Fair Value of Derivatives - Net”, which is presented under Other Income (Expenses) in the consolidated statements of comprehensive income.
59
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
20.
DERIVATIVES (continued)
The following are the details of the contracts:
Cross Currency Swap Contracts
No. | Counter-parties | Contract Period and Swap Amount | Annual Swap Premium Rate | Swap Premium Payment Date | Amount of Swap Premium Paid / Amortized (Rp) | |
2011 | 2010 | |||||
a. | GSI(1) | May 13, 2005 - November 5, 2010 Swap Rp832,250 for US$100,000 | (i) Fixed rate of 6.96% per annum for US$50,000 and (ii) 6-month U.S. dollar LIBOR plus 2.62% per annum for US$50,000, netted with (a) 6-month U.S. dollar LIBOR per annum multiplied by US$11,750 during the period | Every May 5 and November 5 | - | 28,850 |
b. | GSI(2) | May 13, 2005 - November 5, 2010 Swap Rp245,000 for US$25,000 | 4.30% of US$25,000 | Every May 5 and November 5 | - | 6,119 |
c. | GSI(4) | August 22, 2005 - June 22, 2012 The Company will swap the following: · US$75,000 which is equal to US$75,000 multiplied by the lowest IDR/USD exchange rate within the period of August 22, 2005 - June 22, 2012 if the IDR/USD spot rate at termination date is less than or equal to the lowest of IDR/USD exchange rate mentioned above plus Rp4,300 (in full amount) · US$75,000 which is equal to US$75,000 multiplied by IDR/USD spot rate at termination date minus Rp4,300 (in full amount) if IDR/USD spot rate at termination date is greater than the lowest of IDR/USD exchange rate mentioned above plus Rp4,300 (in full amount) | 3.28% of US$75,000 | Every June 22 and December 22 | 10,689 | 14,450 |
d. | StandChart | January 11, 2006 - June 22, 2012 Swap Rp236,250 for US$25,000 | 4.78% of US$25,000 | Every June 22 and December 22 | 5,154 | 5,558 |
e. | StandChart | March 15, 2006 - June 22, 2012 Swap Rp228,550 for US$25,000 | 3.75% of US$25,000 | Every June 22 and December 22 | 4,043 | 4,360 |
f. | StandChart | May 12, 2006 - September 22, 2012 Swap Rp217,500 for US$25,000 | 3.45% of US$25,000 | Every June 22 and December 22 | 3,720 | 4,012 |
g. | HSBC(3) | August 8, 2006 - November 5, 2010 Swap Rp225,000 for US$25,000 | 4.00% of US$25,000 | Every May 5 and November 5 | - | 4,527 |
h. | MLIB(5) | August 8, 2008 - June 22, 2012 The Company will receive the following: · zero amount if the IDR/USD spot rate at termination date is less than or equal to Rp8,950 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$50,000 multiplied by (1 - Rp8,950 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp8,950 but is less than or equal to Rp11,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$50,000 multiplied by (Rp11,000 - Rp8,950) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp11,000 to US$1 (in full amounts) | 4.22% of US$50,000 | Every June 22 and December 22 | 11,326 | 12,047 |
i. | MLIB | September 2, 2008 - June 12, 2013 The Company will receive the following: · zero amount if the IDR/USD spot rate at termination date is less than or equal to Rp8,800 to US$1 (in full amounts) · certain U.S. dollar amount as arranged in the contract multiplied by (IDR/USD spot rate - Rp8,800) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp8,800 but is less than or equal to Rp12,000 to US$1 (in full amounts) · certain U.S. dollar amount as arranged in the contract multiplied by (Rp3,200 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp12,000 to US$1 (in full amounts) | 4.10% of US$25,000 up to June 12, 2011, and 4.10% of decreasing U.S. dollar amount as arranged in the contract up to June 12, 2013 | Every June 12 and December 12 | 5,532 | 5,984 |
(1)
On November 5, 2010, this contract expired and the Company received settlement gain on the cross currency swap amounting to Rp59,929.
(2)
On November 5, 2010, this contract expired and the Company paid settlement loss on the cross currency swap amounting to (Rp21,881).
(3)
On November 5, 2010, this contract expired and the Company paid settlement loss on the cross currency swap amounting to (Rp2,550).
(4)
On June 28, 2011, this contract was terminated and the Company received settlement gain on the cross currency swap amounting to US$3,650 or equivalent to Rp31,379 on July 1, 2011.
(5)
On June 28, 2011, this contract was terminated and the Company paid settlement loss on the cross currency swap amounting to (US$1,456) or equivalent to (Rp12,519) on July 1, 2011.
60
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
20. DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
No. | Counter-parties | Contract Period and Swap Amount | Annual Swap Premium Rate | Swap Premium Payment Date | Amount of Swap Premium Paid / Amortized (Rp) | |
2011 | 2010 | |||||
j. | MLIB(7) | September 8, 2008 - June 22, 2012 The Company will receive the following: · zero amount if the IDR/USD spot rate at termination date is less than or equal to Rp9,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$25,000 multiplied by (1 - Rp9,000 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp9,000 but is less than or equal to Rp11,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$25,000 multiplied by (Rp11,000 - Rp9,000) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp11,000 to US$1 (in full amounts) | 2.52% of US$25,000 | Every June 22 and December 22 | 3,381 | 3,597 |
k. | DBS | September 10, 2008 - June 12, 2013 The Company will receive the following: · zero amount if the IDR/USD spot rate at the scheduled settlement date is at or less than Rp8,800 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to U.S. dollar amount at scheduled settlement date multiplied by (IDR/USD spot rate - Rp8,800) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at settlement date is greater than Rp8,800 and is at or less than Rp12,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to U.S. dollar amount at scheduled settlement date multiplied by (Rp12,000 - Rp8,800) divided by IDR/USD spot rate (in full amounts) if the IDR/USD spot rate at settlement date is greater than Rp12,000 to US$1 (in full amounts) | 3.945% of US$25,000 up to June 12, 2011, and 3.945% of decreasing U.S. dollar amount as arranged in the contract up to June 12, 2013 | Every June 12 and December 12 | 5,330 | 4,577 |
l. | GSI(6) | December 16, 2008 - November 5, 2010 The Company will receive the following: · zero amount if the IDR/USD spot rate at termination date is less than or equal to Rp11,500 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$84,000 multiplied by (IDR/USD spot rate - Rp11,500 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp11,500 but is less than or equal to Rp15,000 to US$1 (in full amounts) · certain U.S. dollar amount which is equal to US$84,000 multiplied by (Rp3,500 divided by IDR/USD spot rate) (in full amounts) if the IDR/USD spot rate at termination date is greater than Rp15,000 to US$1 (in full amounts) | Upfront premium of US$9,500 (equivalent to Rp105,212) which was fully paid on December 19, 2008. The premium (charged to prepaid expenses) is amortized over the contract period. | - | - | 41,809 |
(6) On November 5, 2010, this contract expired and the Company received zero settlement on the cross currency swap.
(7) On June 28, 2011, this contract was terminated and the Company paid settlement loss on the cross currency swap amounting to (US$194) or equivalent to (Rp1,666) on July 1, 2011.
61
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
20.
DERIVATIVES (continued)
Cross Currency Swap Contracts (continued)
All cross currency swap contracts with GSI (contracts No. a, b and c) are structured to include credit-linkage with the Company as the reference entity and with the Company’s (i) bankruptcy, (ii) failure to pay on certain debt obligations or (iii) restructuring of certain debt obligations as the relevant credit events. Upon the occurrence of any of these credit events, the Company’s obligations and those of GSI under these swap contracts will be terminated without any further payments or settlements being made by or owed to either party, including a payment by either party of any marked-to-market value of the swap contracts.
Interest Rate Swap Contracts
No. | Counter-parties | Contract Period | Annual Interest Swap Rate | Swap Income (Expense) Receipt (Payment) Date | Amount of Swap Expense Paid (Rp) | |
2011 | 2010 | |||||
m. | HSBC | April 23, 2008 - November 27, 2016 | 5.42% of US$27,037, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.45% per annum | Every April 1 and October 1 up to October 2009, and every May 27 and November 27 up to termination date | 3,465 | 3,995 |
n. | HSBC | April 23, 2008 - September 29, 2019 | 4.82% of US$44,200, the notional amount of which will decrease based on predetermined schedule, in exchange for U.S. dollar LIBOR plus 0.35% per annum | Every January 28 and July 28 up to July 2009, and every March 29 and September 29 up to termination date | 13,800 | 16,920 |
o. | GSI | September 2, 2008 - June 12, 2013 | (8.10% - underlyer return) of US$100,000 per annum, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every June 10 and December 10 up to June 2011, and every June 12 and December 12 up to termination date | 18,320 | 24,299 |
p. | DBS | September 5, 2008 - June 12, 2013 | 5.625% of US$25,000 per annum, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every June 10 and December 10 up to December 2010, and every June 12 and December 12 up to termination date | 4,555 | 3,849 |
q. | DBS | October 23, 2008 - June 12, 2013 | 5.28% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | 5,815 | 6,676 |
r. | BTMUFJ | December 1, 2008 - June 12, 2013 | 4.46% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | 3,141 | 4,778 |
s. | BTMUFJ | December 4, 2008 - June 12, 2013 | 4.25% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | 3,271 | 4,292 |
t. | BTMUFJ | December 12, 2008 - June 12, 2013 | 4.09% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | 2,791 | 4,778 |
u. | StandChart | December 19, 2008 - June 12, 2013 | 3.85% of US$40,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | 3,858 | 5,384 |
v. | DBS | December 22, 2008 - December 12, 2012 | 4.02% of US$26,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | 3,480 | 3,909 |
w. | DBS | January 21, 2009 - December 12, 2012 | 3.83% of US$26,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | 3,093 | 3,451 |
62
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
20.
DERIVATIVES (continued)
Interest Rate Swap Contracts (continued)
No. | Counter-parties | Contract Period | Annual Interest Swap Rate | Swap Income (Expense) Receipt (Payment) Date | Amount of Swap Expense Paid (Rp) | |
2011 | 2010 | |||||
x. | BTMUFJ | March 2, 2009 - June 12, 2012 | 4.10% of US$36,500, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | 4,097 | 4,901 |
y. | ING Bank N.V. | March 3, 2009 - December 12, 2011 | 4.0094% of US$25,000, the notional amount of which will decrease based on predetermined schedule, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and every June 12 and December 12 up to termination date | 2,663 | 3,734 |
z. | ING Bank N.V. | April 14, 2009 - June 12, 2011 | 3.75% of US$33,500, in exchange for 6-month U.S. dollar LIBOR plus 1.85% per annum | Every March 25 and September 25 up to March 2011, and on June 12, 2011 | 3,126 | 4,199 |
Currency Forward Contracts
No. | Counter-parties | Contract Period | IDR/USD Fixing Rate (in full amounts) |
aa. | JP Morgan | July 14, 2011 - December 12, 2011 | Rp8,699 to US$1 |
ab. | DBS | July 19, 2011 - December 12, 2011 | Rp8,699 to US$1 |
ac. | Deutsche Bank | July 19, 2011 - December 12, 2011 | Rp8,714 to US$1 |
ad. | Deutsche Bank | July 21, 2011 - December 12, 2011 | Rp8,665 to US$1 |
ae. | JP Morgan | July 21, 2011 - December 12, 2011 | Rp8,665 to US$1 |
af. | StandChart | July 22, 2011 - December 12, 2011 | Rp8,623 to US$1 |
ag. | JP Morgan | July 22, 2011 - December 12, 2011 | Rp8,637 to US$1 |
ah. | Danareksa | July 26, 2011 - December 12, 2011 | Rp8,604 to US$1 |
ai. | JP Morgan | July 26, 2011 - December 12, 2011 | Rp8,614 to US$1 |
aj. | StandChart | July 26, 2011 - December 12, 2011 | Rp8,614 to US$1 |
ak. | JP Morgan | July 29, 2011 - December 12, 2011 | Rp8,568 to US$1 |
al. | HSBC | August 1, 2011 - November 30, 2011 | Rp8,533 to US$1 |
am. | HSBC | August 1, 2011 - December 12, 2011 | Rp8,541 to US$1 |
an. | JP Morgan | August 2, 2011 - November 30, 2011 | Rp8,538 to US$1 |
ao. | HSBC | August 4, 2011 - November 28, 2011 | Rp8,547 to US$1 |
ap. | HSBC | August 4, 2011 - November 30, 2011 | Rp8,549 to US$1 |
aq. | HSBC | August 10, 2011 - January 24, 2012 | Rp8,698 to US$1 |
ar. | JP Morgan | August 10, 2011 - January 24, 2012 | Rp8,696 to US$1 |
as. | StandChart | August 10, 2011 - January 24, 2012 | Rp8,696 to US$1 |
at. | JP Morgan | August 11, 2011 - January 24, 2012 | Rp8,693 to US$1 |
au. | HSBC | August 11, 2011 - February 28, 2012 | Rp8,714 to US$1 |
av. | HSBC | August 11, 2011 - February 28, 2012 | Rp8,715 to US$1 |
63
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
20.
DERIVATIVES (continued)
Currency Forward Contracts (continued)
No. | Counter-parties | Contract Period | IDR/USD Fixing Rate (in full amounts) |
aw. | JP Morgan | August 12, 2011 - March 29, 2012 | Rp8,764 to US$1 |
ax. | StandChart | August 15, 2011 - May 30, 2012 | Rp8,785 to US$1 |
ay. | StandChart | August 15, 2011 - May 30, 2012 | Rp8,787 to US$1 |
az. | StandChart | August 16, 2011 - June 12, 2012 | Rp8,788 to US$1 |
ba. | DBS | August 19, 2011 - January 27, 2012 | Rp8,708 to US$1 |
bb. | ING | August 19, 2011 - January 27, 2012 | Rp8,706 to US$1 |
bc. | DBS | August 19, 2011 - January 27, 2012 | Rp8,705 to US$1 |
bd. | DBS | August 19, 2011 - June 12, 2012 | Rp8,819 to US$1 |
be. | JP Morgan | August 19, 2011 - June 12, 2012 | Rp8,826 to US$1 |
bf. | HSBC | August 19, 2011 - June 12, 2012 | Rp8,832 to US$1 |
bg. | ING | August 22, 2011 - January 12, 2012 | Rp8,662 to US$1 |
bh. | ING | August 22, 2011 - January 30, 2012 | Rp8,679 to US$1 |
bi. | DBS | August 22, 2011 - February 28, 2012 | Rp8,715 to US$1 |
bj. | ING | August 22, 2011 - March 28, 2012 | Rp8,737 to US$1 |
bk. | ING | August 23, 2011 - January 12, 2012 | Rp8,644 to US$1 |
bl. | ING | August 23, 2011 - January 12, 2012 | Rp8,647 to US$1 |
bm. | GSI | August 23, 2011 - January 12, 2012 | Rp8,640 to US$1 |
bn. | GSI | August 24, 2011 - January 27, 2012 | Rp8,645 to US$1 |
bo. | RBS | August 24, 2011 - February 10, 2012 | Rp8,666 to US$1 |
bp. | GSI | August 24, 2011 - February 29, 2012 | Rp8,663 to US$1 |
bq. | GSI | August 24, 2011 - February 29, 2012 | Rp8,675 to US$1 |
21.
FINANCIAL ASSETS AND LIABILITIES
The Group has various financial assets such as trade and other accounts receivable, cash and cash equivalents and short-term investments, which arise directly from the Group’s operations. The Group’s principal financial liabilities, other than derivatives, consist of loans and bonds payable, procurement payable, trade and other accounts payable. The main purpose of these financial liabilities is to finance the Group’s operations. The Company also enters into derivative transactions, primarily cross currency swaps and interest rate swaps, for the purpose of managing its foreign exchange and interest rate exposures emanating from the Company’s loans and bonds payable in foreign currencies.
64
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
21.
FINANCIAL ASSETS AND LIABILITIES (continued)
The following table sets forth the Group’s financial assets and financial liabilities as of
September 30, 2011 and December 31, 2010:
September 30,
December 31,
2011
2010
Financial Assets
Held for trading
Derivative assets
231,468
69,334
Loans and receivables
Cash and cash equivalents
1,809,127
2,075,270
Accounts receivable - trade and others - net
1,455,564
1,558,457
Other current financial assets
35,351
53,119
Due from related parties - net
10,124
8,421
Other non-current financial assets
88,950
77,675
Available for sale
Other current financial assets - short-term
investments - net
-
-
Other non-current financial assets - other long-term
investments - net
2,730
2,730
Total Financial Assets
3,633,314
3,845,006
Financial Liabilities
Held for trading
Derivative liabilities
183,136
215,403
Liabilities at amortized cost
Short-term loan
298,516
-
Accounts payable - trade
553,625
645,505
Procurement payable
3,378,681
3,644,467
Accrued expenses
1,506,372
1,710,885
Deposits from customers
28,078
50,279
Loans payable - current maturities
3,901,985
3,184,147
Bonds payable - current maturities
41,989
1,098,131
Other current financial liabilities
43,851
23,127
Due to related parties
13,415
22,099
Loans payable - net of current maturities
5,425,895
7,666,804
Bonds payable - net of current maturities
11,975,009
12,114,104
Total Financial Liabilities
27,350,552
30,374,951
65
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
21.
FINANCIAL ASSETS AND LIABILITIES (continued)
The following table sets forth the carrying values and estimated fair values of the Group’s financial instruments that are carried in the consolidated statements of financial position as of September 30, 2011 and December 31, 2010:
Carrying Amount | Fair Value | ||||
September 30, 2011 | December 31, | September 30, 2011 | December 31, | ||
2010 | 2010 | ||||
Current Financial Assets | |||||
Cash and cash equivalents | 1,809,127 | 2,075,270 | 1,809,127 | 2,075,270 | |
Accounts receivable trade and others - net | 1,455,564 | 1,558,457 | 1,455,564 | 1,558,457 | |
Derivative assets | 231,468 | 69,334 | 231,468 | 69,334 | |
Other current financial assets - net | 35,351 | 53,119 | 35,351 | 53,119 | |
Total current financial assets | 3,531,510 | 3,756,180 | 3,531,510 | 3,756,180 | |
Non-current Financial Assets |
| ||||
Due from related parties - net | 10,124 | 8,421 | 8,648 | 7,176 | |
Other non-current financial asset-net | 91,680 | 80,405 | 90,346 | 76,039 | |
Total non-current financial assets | 101,804 | 88,826 | 98,994 | 83,215 | |
Total Financial Assets | 3,633,314 | 3,845,006 | 3,630,504 | 3,839,395 | |
Current Financial Liabilities | |||||
Short-term loan | 298,516 | - | 298,516 | - | |
Accounts payable - trade | 553,625 | 645,505 | 553,625 | 645,505 | |
Procurement payable | 3,378,681 | 3,644,467 | 3,378,681 | 3,644,467 | |
Accrued expenses | 1,506,372 | 1,710,885 | 1,506,372 | 1,710,885 | |
Deposits from customers | 28,078 | 50,279 | 28,078 | 50,279 | |
Derivative liabilities | 183,136 | 215,403 | 183,136 | 215,403 | |
Loans payable - current portion | 3,901,985 | 3,184,147 | 3,828,422 | 3,155,634 | |
Bonds payable - current portion | 41,989 | 1,098,131 | 43,516 | 1,110,737 | |
Other current financial liabilities | 43,851 | 23,127 | 43,851 | 23,127 | |
Total current financial liabilities | 9,936,233 | 10,571,944 | 9,864,197 | 10,556,037 | |
Non-current Financial Liabilities | |||||
Due to related parties | 13,415 | 22,099 | 11,458 | 18,833 | |
Loans payable - non-current portion | 5,425,895 | 7,666,804 | 5,094,671 | 7,510,510 | |
Bonds payable - non-current portion | 11,975,009 | 12,114,104 | 12,231,069 | 13,228,171 | |
Total non-current financial liabilities | 17,414,319 | 19,803,007 | 17,337,198 | 20,757,514 | |
Total Financial Liabilities | 27,350,552 | 30,374,951 | 27,201,395 | 31,313,551 | |
The fair values of the financial assets and liabilities are presented at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate such value:
Short-term financial assets and liabilities:
·
Short-term financial instruments with remaining maturities of one year or less (cash and cash equivalents, trade and other accounts receivable, other current financial assets, short-term loan, trade accounts payable, procurement payable, accrued expenses, deposits from customers and other current financial liabilities)
These financial instruments approximate their carrying amounts largely due to their short-term maturities.
21.
FINANCIAL ASSETS AND LIABILITIES (continued)
·
Derivative Financial Instruments
Cross currency swap contracts (including bifurcated embedded derivative)
These derivatives are measured at their fair values using internal valuation techniques as no quoted market prices exist for such instruments. The principal technique used to value these instruments is the use of discounted cash flows. The key inputs include interest rate yield curves, foreign exchange rates, Credit Default Spread (“CDS”), and the spot price of the underlying instruments.
Interest rate swap contracts
These derivatives are measured at their fair values, computed using discounted cash flows based on observable market inputs which include interest rate yield curves and payment dates.
Currency forward contracts
These derivatives are measured at their fair values, computed using discounted cash flows based on observable market inputs which include foreign exchange rates, payment dates and the spot price of the underlying instruments.
Long-term financial assets and liabilities:
·
Long-term fixed-rate and variable-rate financial liabilities (unquoted loans and bonds payable)
The fair value of these financial liabilities is determined by discounting future cash flows using applicable rates from observable current market transactions for instruments with similar terms, credit risk and remaining maturities.
·
Other long-term financial assets and liabilities (due from/to related parties, other long-term investments and other non-current financial assets)
Estimated fair value is based on discounted value of future cash flows adjusted to reflect counterparty risk (for financial assets) and the Group’s own credit risk (for financial liabilities) and using risk-free rates for similar instruments.
·
Financial instruments quoted in an active market
The fair value of the bonds issued by the Company which are traded in an active market is determined with reference to their quoted market prices.
For equity investments classified as available-for-sale, the fair value is determined based on the latest market quotation as published by the Indonesia Stock Exchange as of September 30, 2011 and December 31, 2010.
22.
EMPLOYEE BENEFIT OBLIGATIONS - NET OF CURRENT PORTION
This account consists of the non-current portions of employee benefit obligations as follows:
September 30,
December 31,
2011
2010
Post-retirement healthcare (Note 29)
525,809
639,271
Labor Law 13 (Note 29)
176,712
187,944
Service award
28,630
43,058
Accumulated leave benefits
2,656
2,134
Total
733,807
872,407
23.
CAPITAL STOCK
The Company’s capital stock ownership as of September 30, 2011 and December 31, 2010 is as follows:
Number of
Percentage
Shares Issued
of Ownership
Stockholders
and Fully Paid
Amount
(%)
September 30, 2011
A Share
Government
1
-
-
B Shares
Qatar Telecom (Qtel Asia) Pte. Ltd.
3,532,056,600
353,206
65.00
Government
776,624,999
77,662
14.29
SKAGEN Funds (SKAGEN AS)
(Note 38d)
302,466,950
30,247
5.57
Director:
Fadzri Sentosa
10,000
1
0.00
Others (each holding below 5%)
822,774,950
82,277
15.14
Total
5,433,933,500
543,393
100.00
December 31, 2010
A Share
Government
1
-
-
B Shares
Qatar Telecom (Qtel Asia) Pte. Ltd.
3,532,056,600
353,206
65.00
Government
776,624,999
77,662
14.29
SKAGEN Funds (SKAGEN AS)
(Note 38d)
277,824,400
27,782
5.11
Director:
Fadzri Sentosa
10,000
1
0.00
Others (each holding below 5%)
847,417,500
84,742
15.60
Total
5,433,933,500
543,393
100.00
The “A” share is a special share held by the Government and has special voting rights. The material rights and restrictions which are applicable to the “B” shares are also applicable to the “A” share, except that the Government may not transfer the “A” share, which has a veto right with respect to (i) amendment to the objective and purposes of the Company; (ii) increase of capital without pre-emptive rights; (iii) merger, consolidation, acquisition and demerger; (iv) amendment to the provisions regarding the rights of “A” share as stipulated in the Articles of Association; and (v) dissolution, bankruptcy and liquidation of the Company. The “A” share also has the right to appoint one director and one commissioner of the Company.
66
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
24.
OPERATING REVENUES
The balance of this account for the nine months ended September 30, 2011 and 2010 consists of the following:
20112010
Cellular
Usage charges
6,269,465
6,032,499
Value-added services
5,520,596
5,307,527
Interconnection revenues (Note 35)
871,506
921,530
Tower leasing (Note 32f)
307,360
166,944
Monthly subscription charges
96,235
103,181
Connection fee
10,358
958
Sale of Blackberry handsets
1,673
32,836
Upfront discount and Customer Loyalty Program (Note 2k)
(670,960
)
(663,637)
Others
180,876
114,027
Sub-total
12,587,109
12,015,865
MIDI
Internet Protocol Virtual Private Network (IP VPN)
501,686
449,565
Internet
291,738
404,245
World link and direct link
190,864
207,052
Leased line
156,815
134,912
Application services
140,739
167,252
Value-added Service
128,271
21,273
Frame net
119,758
178,616
Satellite lease
93,878
94,399
Multiprotocol Label Switching (MPLS)
64,414
44,216
Digital data network
53,030
67,239
TV link
4,631
4,278
Others
91,246
37,829
Sub-total
1,837,070
1,810,876
Fixed Telecommunication
International Calls
696,552
786,648
Fixed Wireless
145,529
134,518
Fixed Line
94,250
95,172
Sub-total
936,331
1,016,338
Total
15,360,510
14,843,079
Operating revenues from related parties amounted to Rp1,108,454 and Rp1,176,404 for the nine months ended September 30, 2011 and 2010, respectively. These amounts represent 7.22% and 7.93% of the total operating revenues for the nine months ended September 30, 2011 and 2010, respectively (Note 30).
The operating revenues from interconnection services are presented on a gross basis (Note 2k).
67
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
25.
OPERATING EXPENSES - COST OF SERVICES
The balance of this account for the nine months ended September 30, 2011 and 2010 consists of the following:
2011
2010
Interconnection (Note 35)
1,303,325
1,333,249
Radio frequency fee (Notes 30 and 34)
1,241,634
1,183,784
Maintenance
666,035
689,222
Utilities
556,552
533,125
Rent (Note 32h)
459,603
369,264
Blackberry access fee
256,182
135,073
Leased circuits
241,402
280,089
Cost of SIM cards and pulse reload vouchers
223,868
188,296
USO (Notes 30 and 34)
171,931
161,338
Concession fee (Notes 30 and 34)
88,458
85,023
Installation
74,371
66,617
Delivery and transportation
57,616
64,682
Billing and collection
38,342
47,348
Cost of handsets and modems
20,801
64,714
License
17,014
21,374
Others
59,163
67,907
Total
5,476,297
5,291,105
Interconnection relates to the expenses for the interconnection between the Company’s telecommunications networks and those owned by Telkom or other telecommunications carriers
(Note 2k).
26. OPERATING EXPENSES - PERSONNEL
The balance of this account for the nine months ended September 30, 2011 and 2010 consists of the following:
2011
2010
Severance due to Voluntary Separation Scheme (“VSS”)*
566,034
-
Salaries
363,145
362,929
Incentives and other employee benefits
241,264
235,760
Employee income tax
200,998
107,101
Bonuses
162,633
156,188
Medical expense
46,028
51,969
Outsourcing
34,194
48,553
Early retirement**
10,824
11,761
Post-retirement healthcare benefits (Note 29)
(103,335)
79,291
26.
OPERATING EXPENSES – PERSONNEL (continued)
2011
2010
Separation, appreciation and compensation expense
under Labor Law No. 13/2003 (Note 29)
(7,401)
31,816
Pension (Note 29)
(454)
34,874
Others
3,532
18,222
Total
1,517,462
1,138,464
*
On January 20, 2011, the Company’s Board of Directors issued Directors’ Decree No. 003/Direksi/2011 regarding the Organizational Restructuring Program through an offering program on the basis of mutual agreement between the Company and certain employees (VSS), that became effective on the same date. For the nine months ended September 30, 2011, there were 994 employees who availed themselves of the program.
**
On June 27, 2006, the Company’s Directors issued Decree No. 051/DIREKSI/2006, “Additional Benefits for Voluntarily Resigned Employees”. Under this decree, employees qualified for early retirement and who voluntarily resigned after the approval from the Board of Directors were given benefits of additional remuneration, traveling and training package. For the nine months ended September 30, 2011 and 2010, there were 9 and 5 employees, respectively, who took the option.
The personnel expenses capitalized to properties under construction and installation during the nine months ended September 30, 2011 and 2010 amounted to Rp34,595 and Rp29,233, respectively.
27.
OPERATING EXPENSES - GENERAL AND ADMINISTRATION
The balance of this account for the nine months ended September 30, 2011 and 2010 consists of the following:
2011
2010
Rent
82,980
83,662
Utilities
80,040
72,030
Professional fees
70,856
72,737
Transportation
45,755
44,797
Insurance
33,329
27,355
Office 25,025
35,537
Provision for impairment of receivables (Note 5)
17,558
54,344
Catering
17,101
18,222
Training, education and research
15,928
12,346
Others (each below Rp10,000)
64,420
63,276
Total452,992
484,306
28.
OTHER EXPENSES - FINANCING COST
The balance of this account for the nine months ended September 30, 2011 and 2010 consists of the following:
2011
2010
Interest on loans
1,291,157
1,585,365
Amortization of debt and bonds issuance
costs, consent solicitation fees and discount (Notes 14, 18 and 19)
62,331
74,687
Bank charges
4,540
3,860
Excess of purchase price over nominal value
due to redemption of GN 2010 and GN 2012
-
81,142
Total
1,358,028
1,745,054
68
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
29.
PENSION PLAN
The Company, Satelindo and Lintasarta have defined benefit and defined contribution pension plans covering substantially all of their qualified permanent employees.
Defined Benefit Pension Plan
The Company, Satelindo and Lintasarta provide defined benefit pension plans to their respective employees under which pension benefits to be paid upon retirement are based on the employees’ most recent basic salary and number of years of service. PT Asuransi Jiwasraya (“Jiwasraya”), a state-owned life insurance company, manages the plans. Pension contributions are determined by periodic actuarial calculations performed by Jiwasraya.
Based on an amendment dated December 22, 2000 of the Company’s pension plan, which was further amended on March 29, 2001, the benefits and the premium payment pattern were changed.
Before the amendment, the premium was regularly paid annually until the plan would be fully funded and the benefits consisted of retirement benefit (regular monthly or lump-sum pension) and death insurance. In conjunction with the amendment, the plan would be fully funded after making installment payments up to January 2002 of the required amount to fully fund the plan determined as of September 1, 2000. The amendment also includes an additional benefit in the form of thirteenth-month retirement benefit, which is payable annually 14 days before Idul Fitri (“Moslem Holiday”).
The amendment covers employees registered as participants of the pension plan as of
September 1, 2000 and includes an increase in basic salary pension by 9% compounded annually starting from September 1, 2001. The amendment also stipulates that there will be no increase in the premium even in cases of mass employee terminations or changes in marital status.
The total premium installments based on the amendment amounted to Rp355,000 and were paid on due dates.
On March 1, 2007, the Company entered into an agreement with Jiwasraya to provide defined death insurance plan to 1,276 employees as of January 1, 2007, who are not covered by the defined benefit pension plan as stated above. Based on the agreement, a participating employee will receive:
·
Expiration benefit equivalent to the cash value at the normal retirement age, or
·
Death benefit not due to accident equivalent to 100% of insurance money plus cash value when the employee dies not due to accident, or
·
Death benefit due to accident equivalent to 200% of insurance money plus cash value when the employee dies due to accident.
The premium of Rp7,600 was fully paid on March 29, 2007. Subsequently, in August 2007, February to December 2008, January to December 2009, January to December 2010 and January to September 2011, the Company made payments for additional premium of Rp275 for additional 55 employees, Rp805 for additional 161 employees, Rp415 for additional 81 employees, Rp120 for additional 14 employees and Rp228 for additional 26 employees, respectively.
69
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
29.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
On June 25, 2003, Satelindo entered into an agreement with Jiwasraya to amend the benefits and premium payment pattern of the former’s pension plan. The amendment covers employees registered as participants of the pension plan as of December 25, 2002 up to June 25, 2003. Other new conditions include the following:
·
An increase in pension basic salary at 6% compounded annually starting from December 25, 2002
·
Thirteenth-month retirement benefit, which is payable annually 14 days before Idul Fitri
·
An increase in periodic payment of retirement benefit at 6% compounded annually starting one year after receiving periodic retirement benefit for the first time
·
If the average annual interest rate of time deposits of government banks exceeds 15%, the participants’ retirement benefit will be increased by a certain percentage in accordance with the formula agreed by both parties.
On April 15, 2005, Lintasarta entered into an agreement with Jiwasraya to replace their existing agreement. Based on the new agreement, the benefits and the premium payment pattern were changed. This agreement is effective starting January 1, 2005. The total premium installments based on the agreement amounted to Rp61,623, which is payable in 10 annual installments starting 2005 until 2015.
The new agreement covers employees registered as participants of the pension plan as of
April 1, 2003. The conditions under the new agreement include the following:
·
An increase in pension basic salary by 3% (previously was estimated at 8%) compounded annually starting April 1, 2003
·
An increase in periodic payment of retirement benefit at 5% compounded annually starting one year after receiving periodic retirement benefit for the first time
·
If the average annual interest rate of time deposits of government banks exceeds 15%, the participants’ retirement benefit will be increased by a certain percentage in accordance with the formula agreed by both parties.
On May 2, 2005, Lintasarta entered into an agreement with Jiwasraya to amend the above agreement. The amendment covers employees registered as participants of the pension plan as of April 1, 2003 up to November 30, 2004 with additional 10 annual premium installments totalling Rp1,653 which are payable starting 2005 until 2015.
The contributions made by Lintasarta to Jiwasraya amounted to Rp9,653 each for the nine months ended September 30, 2011 and 2010, respectively.
The net periodic pension cost for the pension plans of the Company and Lintasarta for the nine months ended September 30, 2011 was calculated based on actuarial valuations as of June 30, 2011 and December 31, 2010, respectively. The net periodic pension cost for the pension plans for the nine months ended September 30, 2010 was calculated based on actuarial valuations as of December 31, 2009. The prepaid pension cost as of December 31, 2010 was calculated based on actuarial valuation as of December 31, 2010. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
September 30,
December 31,
September 30,
2011
2010
2010
Annual discount rate
8.0 - 8.5%
8.5% - 9.0%
10.5 - 10.7%
Expected annual rate of return on plan assets4.5 - 9.0%4.5 - 9.0% 4.5 - 9.0%
Annual rate of increase in compensation
3.0 - 9.0%
3.0 - 9.0%
3.0 - 9.0%
Mortality rate (Indonesian Mortality Table - TMI)
TMI 1999
TMI 1999
TMI 1999
29.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
a.
The composition of the net periodic pension cost for the nine months ended September 30, 2011 and 2010 is as follows:
2011
2010
Interest cost
35,887
55,919
Service cost
19,842
31,174
Settlement loss
1,054
-
Amortization of unrecognized actuarial loss
896
638
Return on plan assets
(39,134
)
(52,857
)
Curtailment gain
(18,999
)
-
Net periodic pension cost (Note 26)
(454
)
34,874
b.
The funded status of the plans as of September 30, 2011 and December 31, 2010 is as follows:
September 30,
December 31,
2011
2010
Plan assets at fair value
568,925
852,958
Projected benefit obligation
(449,489
)*
(750,625)
Excess of plan assets over projected benefit obligation
119,436
102,333
Unrecognized actuarial loss
2,752
10,928
Total prepaid pension cost
122,188
113,261
* Net of curtailment effect during January - June 2011 due to VSS program (Note 26)
c.
Movements in the prepaid pension cost for the nine months ended September 30, 2011 and year ended December 31, 2010 are as follows:
2011
2010
Balance at beginning of period
Company
82,871
124,720
Lintasarta
30,390
25,100
Net periodic pension cost
Company
3,411
(41,505)
Lintasarta
(2,957
)
(4,183)
Refund from Jiwasraya
Company
(1,408
)
(464)
Lintasarta
-
(180)
29.
PENSION PLAN (continued)
Defined Benefit Pension Plan (continued)
c.
Movements in the prepaid pension cost for the nine months ended September 30, 2011 and year ended December 31, 2010 are as follows (continued):
2011
2010
Contribution to Jiwasraya
Company
228
120
Lintasarta
9,653
9,653
Balance at end of period
Company
85,102
82,871
Lintasarta
37,086
30,390
d. Prepaid pension cost consists of:
September 30, December 31,
2011
2010
Current portion (presented as part of “Prepaid expenses”)
Company
2,297
1,401
Lintasarta
516
516
2,813
1,917
Long-term portion (presented as “Long-term prepaid pension
- net of current portion”)
Company
82,805
81,470
Lintasarta
36,570
29,874
119,375
111,344
Total prepaid pension cost
122,188
113,261
Plan assets as of September 30, 2011 and December 31, 2010 principally consisted of time deposits, debt securities, long-term investment in shares of stock and property.
70
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
29.
PENSION PLAN (continued)
Defined Contribution Pension Plan
In May 2001 and January 2003, the Company and Satelindo assisted their employees in establishing their respective employees’ defined contribution pension plans, in addition to the defined benefit pension plan as mentioned above. Starting June 2004, the Company also assisted ex-IM3 employees in establishing their defined contribution pension plan. Under the defined contribution pension plan, the employees contribute 10% - 20% of their basic salaries, while the Company does not contribute to the plans. Total contributions of employees for the nine months ended September 30, 2011 and 2010 amounted to Rp32,446 and Rp34,319, respectively. The plan assets are being administered and managed by seven financial institutions appointed by the Company and Satelindo, based on the choice of the employees.
Labor Law No. 13/2003
The Company, Lintasarta and IMM also accrue benefits under Labor Law No. 13/2003 (“Labor Law”) dated March 25, 2003. Their employees will receive the benefits which are higher under either this law or the defined benefit pension plan.
The net periodic pension cost under the Labor Law of the Company and the subsidiaries for the nine months ended September 30, 2011 was calculated based on actuarial valuations as of June 30, 2011 and December 31, 2010, respectively. The net periodic pension cost under the Labor Law for the nine months ended September 30, 2010 was calculated based on actuarial valuations as of December 31, 2009. The accrued pension cost under the Labor Law as of December 31, 2010 was calculated based on actuarial valuation as of December 31, 2010. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
September 30,
December 31,
September 30,
2011
2010
2010
Annual discount rate
8.5 - 9.0%
8.5 - 9.0%
10.5%
Annual rate of increase in compensation8.0 - 9.0% 8.0 - 9.0%9.0 - 10.0%
a.
The composition of the periodic pension cost under the Labor Law for the nine months ended September 30, 2011 and 2010 is as follows:
2011
2010
Service cost
14,542
16,002
Interest cost
12,346
14,689
Amortization of unrecognized past service cost
537
-
Amortization of unrecognized actuarial loss
14
1,125
Curtailment gain
(34,840
)
-
Net periodic pension cost under the Labor Law (Note 26)
(7,401)
31,816
71
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
29.
PENSION PLAN (continued)
Labor Law No. 13/2003 (continued)
b.
The composition of the accrued pension cost under the Labor Law as of September 30, 2011 and December 31, 2010 is as follows:
September 30,
December 31,
2011
2010
Projected benefit obligation
207,439
*
217,754
Unrecognized actuarial loss
(16,042)
(17,245)
Unrecognized past service cost
(9,095)
(9,632
)
Net accrued pension cost under the Labor Law
182,302
190,877
*
Net of curtailment effect during January - June 2011 due to VSS program (Note 26)
c.
Movements in the accrued pension cost under the Labor Law for the nine months ended September 30, 2011 and year ended December 31, 2010 are as follows:
2011
2010
Balance at beginning of period
Company
164,285
131,416
Lintasarta
17,648
12,771
IMM
8,944
6,206
Net periodic pension cost under the Labor Law
Company
(13,580)
35,019
Lintasarta
3,661
4,974
IMM
2,518
2,840
Benefit payment
Company
(1,174
)
(2,150)
Lintasarta
-
(97
)
IMM
-
(102
)
Balance at end of period
Company
149,531
164,285
Lintasarta
21,309
17,648
IMM
11,462
8,944
As of September 30, 2011 and December 31, 2010, the current portion of pension cost under the Labor Law included in accrued expenses (Note 17) amounted to Rp5,590 and Rp2,933, respectively, and the non-current portion included in employee benefit obligations amounted to Rp176,712 and Rp187,944, respectively (Note 22).
72
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
29.
PENSION PLAN (continued)
Post-retirement Healthcare
The Company provides post-retirement healthcare benefits to its employees who leave the Company after the employees fulfill the early retirement requirement. The spouse and children who have been officially registered in the administration records of the Company are also eligible to receive benefits. If the employees die, the spouse and children are still eligible for the post-retirement healthcare until the spouse dies or remarries and the children reach the age of 25 or get married.
The utilization of post-retirement healthcare is limited to an annual maximum ceiling that refers to monthly pension from Jiwasraya as follows:
·
16 times the Jiwasraya monthly pension for a pensioner who receives monthly pension from Jiwasraya
·
16 times the equality monthly pension for a pensioner who became permanent employee after September 1, 2000
·
16 times the last monthly pension for a pensioner who retired after July 1, 2003 and does not receive Jiwasraya monthly pension.
The net periodic post-retirement healthcare cost for the nine months ended September 30, 2011 and 2010 was calculated based on actuarial valuations as of September 30, 2011 and December 31, 2009, respectively. The accrued post-retirement healthcare cost as of December 31, 2010 was calculated based on actuarial valuation as of December 31, 2010. The actuarial valuations were prepared by an independent actuary, using the projected-unit-credit method and applying the following assumptions:
September 30,
December 31,
September 30,
2011
2010
2010
Annual discount rate
9.5%
9.5%
11.0%
Ultimate cost trend rate
6.0%
6.0%
6.0%
Next year trend rate
14.0%
14.0%
16.0%
Period to reach ultimate cost trend rate
4 years
4 years
5 years
a.
The composition of the periodic post-retirement healthcare cost for the nine months ended September 30, 2011 and 2010 is as follows:
2011
2010
Interest cost
51,629
49,439
Service cost
15,793
22,013
Amortization of unrecognized past service cost
3,904
7,839
Amortization of unrecognized actuarial loss
7,161
-
Curtailment gain
(181,822
)
-
Net periodic post-retirement healthcare cost (Note 26)
(103,335
)
79,291
73
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
29.
PENSION PLAN (continued)
Post-retirement Healthcare (continued)
b.
The composition of the accrued post-retirement healthcare cost as of September 30, 2011 and December 31, 2010 is as follows:
September 30,
December 31,
2011
2010
Projected benefit obligation
677,745
*
846,636
Unrecognized actuarial loss
(118,585)
(161,443)
Unrecognized past service cost
(17,337)
(31,253
)
Net accrued post-retirement healthcare cost
541,823
653,940
* Net of curtailment effect during January - June 2011 due to VSS program (Note 26)
c.
Movements in the accrued post-retirement healthcare cost for the nine months ended
September 30, 2011 and year ended December 31, 2010 are as follows:
2011
2010
Balance at beginning of period
653,940
561,805
Net periodic post-retirement healthcare cost
(103,335
)
104,600
Benefit payment
(8,782
)
(12,465)
Balance at end of period
541,823
653,940
As of September 30, 2011 and December 31, 2010, the current portion of post-retirement healthcare cost included in accrued expenses (Note 17) amounted to Rp16,014 and Rp14,669, respectively, and the non-current portion included in employee benefit obligations amounted to Rp525,809 and Rp639,271, respectively (Note 22).
d.
The effect of a one percentage point change in assumed post-retirement healthcare cost trend rate would result in aggregate service and interest costs for the nine months ended September 30, 2011 and year ended December 31, 2010 and accumulated post-retirement healthcare benefit obligation as of September 30, 2011 and December 31, 2010, as follows:
September 30,
December 31,
2011
2010
Increase
Service and interest costs
85,320
116,581
Accumulated post-retirement healthcare
benefit obligation
1,107,476
1,030,938
Decrease
Service and interest costs
53,384
76,868
Accumulated post-retirement healthcare
benefit obligation
747,234
702,632
74
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES
The details of the accounts and the significant transactions entered into with related parties are as follows:
Amount
Percentage to Total Assets/Liabilities (%)
September 30, 2011
December 31, 2010
September 30, 2011
December 31, 2010
Cash and cash equivalents (Note 4)
Entities under common control:
State-owned banks
1,062,637
1,615,651
2.10
3.06
Accounts receivable - trade (Note 5)
Entities under common control:
State-owned companies
275,513
267,319
0.54
0.51
Ultimate parent company:
Qatar Telecom
-
2,827
-
0.00
Total
275,513
270,146
0.54
0.51
Less allowance for impairment of
receivables
62,192
47,640
0.120.09
Net
213,321
222,506
0.42
0.42
Prepaid expenses
Entities under common control:
Governmental departments
392,244
1,186,669
0.78
2.25
State-owned companies
12,668
14,977
0.02
0.03
Total
404,912
1,201,646
0.802.28
Other current and non-current
assets - financial and non-financial
Entities under common control:
State-owned banks
68,317
91,231
0.14
0.17
Governmental departments
87
87
0.00
0.00
Total
68,404
91,318
0.14
0.17
Due from related parties
Entity under common significant
influence:
Kopindosat
5,991
5,958
0.01
0.01
Entities under common control:
State-owned companies
2,150
1,693
0.01
0.01
Key management personnel:
Senior management
1,945
1,362
0.00
0.00
Ultimate parent company:
Qatar Telecom
53
54
0.00
0.00
Total
10,139
9,067
0.02
0.02
Less allowance for impairment of
receivables
15
646
0.00
0.00
Net
10,124
8,421
0.02
0.02
Long-term prepaid rentals - net
of current portion
Entities under common control:
State-owned companies
22,428
24,672
0.050.05
Entity under common significant
influence:
Kopindosat
10,790
12,817
0.020.02
Total
33,218
37,489
0.070.07
Long-term prepaid licenses - net of
current portion
Entities under common control:
Governmental departments
348,328
397,708
0.69
0.75
75
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Amount
Percentage to Total Assets/Liabilities (%)
September 30, 2011
December 31, 2010
September 30, 2011
December 31, 2010
Long-term advances
Entities under common significant
influence:
PT Personel Alih Daya
9,111
-
0.02
-
Kopindosat
157
1,016
0.00
0.00
Entities under common control:
State-owned companies
44
3,705
0.00
0.01
Total
9,312
4,721
0.02
0.01
Long-term prepaid pension - net
of current portion (Note 29)
Entities under common control:
State-owned companies
119,375
111,344
0.24
0.21
Short-term loan (Note 14)
Entity under common control:
State-owned bank
298,516
-
0.94
-
Accounts payable - trade
Entities under common control:
State-owned companies
24,975
22,260
0.08
0.06
Ultimate parent company
Qatar Telecom
7,488
-
0.02
-
Total
32,463
22,260
0,10
0.06
Procurement payable (Note 15)
Entities under common significant
influence:
PT Personel Alih Daya
19,509
13,210
0.06
0.04
Kopindosat
10,469
22,123
0.03
0.06
Entities under common control:
State-owned companies
14,081
33,348
0.05
0.10
Total
44,059
68,681
0.14
0.20
Accrued expenses
Entities under common control:
Governmental departments (Note 17)
116,032
293,590
0.37
0.85
State-owned companies
67,095
82,641
0.21
0.24
Entities under common significant
influence:
PT Personel Alih Daya
22,753
16,906
0.07
0.04
Kopindosat
14,242
13,838
0.05
0.04
Key management personnel
Senior management
36,733
33,553
0.11
0.10
Total
256,855
440,528
0.81
1.27
Due to related parties
Entities under common control:
State-owned companies
12,863
20,609
0.04
0.06
Ultimate parent company:
Qatar Telecom
552
-
0.00
-
Entity under common significant
influence:
Kopindosat
-
1,490
-
0.00
Total
13,415
22,099
0.04
0.06
Other current and non-current liabilities -
financial and non-financial
Entities under common control:
State-owned companies
6,871
8,118
0.020.02
Governmental departments
2,612
3,895
0.01
0.01
Total
9,483
12,013
0.03
0.03
Loan payable (Note 18)
Entity under common control:
State-owned bank
998,464
1,297,045
3.16
3.75
76
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Percentage to Respective Income
Amount
or Expenses (%)
Nine months ended September 30,
Nine months ended September 30,
2011
2010
2011
2010
Operating revenues (Note 24)
Entities under common control:
State-owned companies
1,041,662
1,134,993
6.78
7.65
Governmental departments
19,677
17,843
0.13
0.12
Ultimate parent company:
Qatar Telecom
47,115
23,568
0.31
0.16
Total
1,108,454
1,176,404
7.22
7.93
Operating expenses
Cost of services
Entities under common control:
Governmental departments (Note 25)
1,502,023
1,430,145
11.50
11.63
State-owned companies
1,178,115
1,229,854
9.03
10.00
Entities under common significant
influence:
Kopindosat
114,532
54,173
0.880.44
PT Personel Alih Daya
55,031
58,862
0.420.48
Ultimate parent company:
Qatar Telecom
51,825
12,726
0.400.10
Total
2,901,526
2,785,760
22.23
22.65
Personnel
Key management personnel:
Senior management
Short-term employee benefits
85,073
83,848
0.65
0.68
Termination benefits
42,963
10,239
0.33
0.09
Other long-term benefits
825
39
0.01
0.00
Sub-total
128,861
94,126
0.99
0.77
Entity under common significant
influence:
PT Personel Alih Daya
21,016
31,168
0.16
0.25
Entities under common control:
State-owned companies
4,102
34,874
0.03
0.28
Total
153,979
160,168
1.18
1.30
Marketing
Entities under common significant
influence:
PT Personel Alih Daya
41,013
30,429
0.31 0.25
Kopindosat
3,130
6,677
0.030.05
Entity under common control:
State-owned company
-
34
-
0.00
Total
44,143
37,140
0.34
0.30
General and administration
Entities under common control:
State-owned companies
67,369
60,077
0.52
0.49
Entities under common significant
influence:
Kopindosat
16,767
17,997
0.130.14
PT Personel Alih Daya
10,937
9,734
0.080.08
Total
95,073
87,808
0.730.71
77
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
Percentage to Respective Income
Amount
or Expenses (%)
Nine months ended September 30,
Nine months ended September 30,
2011
2010
2011
2010
Other income (expenses) - net
Entity under common control:
State-owned banks
(43,538
)
(93,052
)
(5.12)
(5.58)
The relationship and nature of account balances/transactions with related parties are as follows:
No | Related Parties | Relationship | Nature of Account Balances/Transactions | |||
1. | State-owned banks | Under common control | Cash and cash equivalents, other current and non-current financial and non-financial assets, loan payable and other income (expense) | |||
2. | State-owned companies | Under common control | Accounts receivable - trade, due from related parties, prepaid expenses, long-term prepaid rentals, long-term advances, long-term prepaid pension, accounts payable - trade, procurement payable, accrued expenses, due to related parties, other current and non-current financial and non-financial liabilities, operating revenues, operating expenses - cost of services, operating expenses - personnel, operating expenses - general and administration and operating expenses - marketing | |||
3. | Qatar Telecom | Ultimate parent company | Accounts receivable - trade, due from related parties, accounts payable - trade, due to related parties, operating revenues - fixed telecommunication and operating expenses - cost of services |
78
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
30.
ACCOUNTS AND TRANSACTIONS WITH RELATED PARTIES (continued)
No | Related Parties | Relationship | Nature of Account Balances/Transactions | |||
4. | Governmental departments | Under common control | Prepaid expenses, long-term prepaid license, other current and non-current financial and non-financial assets, accrued expenses, other current and non-current financial and non-financial liabilities, operating revenues - MIDI, operating expenses - cost of services and operating expenses - general and administration | |||
5. | Kopindosat | Entity under significant influence | Due from related parties, long-term advances, long-term prepaid rentals, procurement payable, accrued expenses, due to related parties, operating expenses - cost of services, operating expenses - general and administration and operating expenses - marketing | |||
6. | Senior management | Key management personnel | Due from related parties, accrued expenses and operating expenses - personnel | |||
7. | PT Personel Alih Daya | Entity under common significant influence | Procurement payable, accrued expenses, operating expenses - cost of services, operating expenses - personnel, operating expenses - general and administration and operating expenses - marketing |
31.
DISTRIBUTION OF INCOME AND APPROPRIATION OF RETAINED EARNINGS
At the Company’s Annual Stockholders’ General Meeting (“ASGM”), the stockholders approved, among others, the appropriation of annual net income for reserve fund and cash dividend distribution, as follows, and the utilization of the remaining amount for reinvestment and working capital.
ASGM Date | Reserve Fund (Rp) | Dividend per Share (Rp) | Dividend Payment Date | |||
2009 Net Income | ||||||
June 22, 2010 | 14,982 | 137.86 | August 2, 2010 | |||
2010 Net Income | ||||||
June 24, 2011 | - | 59.55 | August 5, 2011 |
Dividend for the Government was paid in accordance with the prevailing laws and regulations in Indonesia.
On July 22 and August 5, 2011, the Company paid dividend amounting to Rp46,248 and Rp277,343, respectively, to the Government and other shareholders for dividend declared on June 24, 2011.
32.
SIGNIFICANT AGREEMENTS AND COMMITMENTS
a.
As of September 30, 2011, commitments on capital expenditures which are contractual agreements not yet realized relate to the procurement and installation of property and equipment amounting to US$176,603 (Note 38f) and Rp673,998.
The significant commitments on capital expenditures are as follows:
Contract Date | Contract Description | Vendor | Amount of Contract/Purchase Orders (“POs”) Already Issued | Amount of Contract/POs Not Yet Served |
December 10, 2010 | Procurement of Technology Upgrade for 2G and 3G Telecommunications Network in Kalimantan (see “e” below) | PT Nokia Siemens Networks and Nokia Siemens Networks Oy | US$38,439 | US$11,708 |
October 1, 2010 | Procurement of Telecommunications Equipment and Related Services | PT Ericsson Indonesia and Ericsson AB | US$81,880 and Rp241,947 | US$1,614 and Rp6,907 |
June 16, 2010 | Procurement of Telecommunication Infrastructure | PT Nokia Siemens Networks and Nokia Siemens Networks Oy | US$109,274 and Rp494,972 | US$1,564 and Rp26,544 |
b.
During May - September 2011, the Company had issued several POs to PT Nokia Siemens Network and Nokia Siemens Network OY with total amount of US$19,967 and Rp101,418 for the procurement of cellular technical equipment in the Sumatra and Java Areas. Based on the POs, the Company agreed to exchange certain existing cellular equipment with new equipment units and pay US$3,968 and Rp64,314 to Nokia for the installation services and additional equipment. For the nine months ended September 30, 2011, the carrying amount of the cellular technical equipment units given up amounted to Rp36,608 (Note 8).
c.
On July 28, 2011, the Company entered into an agreement with PT Quadra Solution, whereby the Company agreed to provide data communication service to PT Quadra Solution related to Project e-KTP (electronicKartu Tanda Penduduk / electronic citizens identity card). The agreement covers the provision of services until December 2012 for a total contract value of Rp283,352.
Up to September 30, 2011, the Company has recognized the operating revenue related to this agreement amounting to Rp21,706, which is classified as part of MIDI.
d.
On July 5, 2011, the Company entered into a memorandum of understanding with Asia Broadcast Satellite Ltd. to procure a new satellite with 36 C-band transponder capacity to replace PALAPA C2 satellite (Note 38a).
e.
On December 10, 2010, the Company agreed with PT Nokia Siemens Networks and Nokia Siemens Networks OY (“Nokia”) to restate and amend the agreement for “Procurement of Technology Upgrade for 2G and 3G Telecommunications Network in Kalimantan” that was originally entered into on June 30, 2010. Based on the new agreement, the Company agreed to exchange certain existing cellular technical equipment units in Kalimantan area with new equipment units from Nokia with total value of US$75,243 consisting of cellular technical equipment with net book value of U$66,963 (net of discount amounting to US$2,029) for 1,325 units of 2G Base Transceiver Station (BTS), 24 units of Base Station Controller (BSC), 11 units of Transcoders, 66 units of Node B equipment and 3 units of Radio Network Controller (RNC), and pay US$6,251 to Nokia for the installation services. As of September 30, 2011, the Company has paid for the installation services. For the nine months ended September 30, 2011, the carrying amount of the cellular technical equipment units given up amounted to Rp400,956 (Note 8) and the accumulated carrying amount of such equipment up to September 30, 2011 amounted to Rp559,241. The Company also committed to procure additional equipment units from Nokia with total value of US$11,708 until the end of 2012.
79
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
32. SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
f.
On January 29, April 15, May 24 and June 3 in 2010, and February 4 and 10 in 2011, the Company agreed to lease part of its telecommunications towers and sites to PT Hutchison CP Telecommunication (“Hutchison”) for a period of 12 years, PT Natrindo Telepon Selular (“NTS”) for a period of 10 years, PT XL Axiata Tbk (“XL Axiata”) for a period of 10 years, PT Berca Global Access (“Berca”) for a period of 10 years, PT Dayamitra Telekomunikasi (“Mitratel”) for a period of 10 years and PT First Media Tbk (“FM”) for a period of 5 years, respectively. Hutchison, NTS, and XL Axiata (on annual basis), Berca and Mitratel (on quarterly basis) and FM (on semi-annual basis) are required to pay the lease and maintenance fees in advance which are recorded as part of unearned income.
The agreements are cancellable before termination under certain conditions, as stated in the agreements.
g.
On April 15, 2010, Lintasarta, a subsidiary, entered into agreements with MOCIT-Balai Telekomunikasi dan Informatika Pedesaan (MOCIT-BTIP), whereby Lintasarta agreed to provide Pusat Layanan Jasa Akses Internet Kecamatan (Center for Internet Access and Services in Rural Areas) (PLIK) for Work Packages (Paket Pekerjaan) 7, 8 and 9 that cover the provinces of Bali, West Nusa Tenggara, East Nusa Tenggara, West Kalimantan, South Kalimantan, East Kalimantan, Central Kalimantan, Maluku and Papua. On December 22, 2010, the agreements were amended to increase the contract value. The agreements cover four years starting from October 15, 2010 with contract value amounting to Rp91,895, Rp143,668 and Rp116,721 for Work Packages 7, 8 and 9, respectively. In accordance with the agreements, Lintasarta placed its time deposits totalling Rp18,200 as a performance bond for the four-year contract period which is classified as part of other non-current financial assets.
On December 12, 2010, Lintasarta entered into agreements with MOCIT-BTIP to providePusat Layanan Jasa Akses Internet Kecamatan Bergerak (Mobile Center for Internet Access and Services in Rural Areas) (PLIKB) for Work Packages 2, 3, 11, 15, 16 and 18 that cover the provinces of North Sumatra, West Sumatra, East Nusa Tenggara, West Kalimantan, South Kalimantan and East Kalimantan. The agreements cover four years starting on September 22, 2011 with contract values amounting to Rp79,533, Rp92,003, Rp60,149, Rp71,879, Rp84,583 and Rp69,830 for Work Packages 2, 3, 11, 15, 16 and 18, respectively.
As of September 30, 2011, Lintasarta has outstanding advance payments from MOCIT-BTIP related with those agreements amounting to Rp76,725 and Rp13,752 which are classified as part of unearned income for the current portion and other non-current liabilities for the long-term portion, respectively.
On May 6, 2010, Lintasarta entered into an agreement with PT Wira Eka Bhakti (WEB), for the procurement of equipment and infrastructure required for the construction of PLIK, as agreed with the MOCIT-BTIP above, with total contract value amounting to Rp189,704. The agreement has been amended several times, with the latest amendment dated March 9, 2011 increasing the contract value to become Rp208,361.
As of September 30, 2011, Lintasarta has outstanding advances to WEB totalling Rp13,688 and Rp671 which are classified as part of advances for the current portion and long-term advances for the long-term portion, respectively.
On March 23, 2011, Lintasarta entered into agreements with WEB and PT Personel Alih Daya (a related party), for the procurement of equipment and infrastructure required for the construction of PLIKB, as agreed with the MOCIT-BTIP above, with total contract value amounting to Rp276,274 and Rp60,739, respectively.
32. SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
As of September 30, 2011, Lintasarta has outstanding advances to WEB and PT Personal Alih Daya totalling Rp16,850 and Rp50,552 which are classified as part of advances for the current portion and long-term advances for the long-term portion, respectively.
h.
On July 2, 2008, the Company entered into an agreement with PT Professional Telekomunikasi Indonesia (“Protelindo”) to lease part of spaces in its telecommunication towers and sites for an initial period of 10 years. The Company may extend the lease period for another 10 years, with additional lease fees based on the inflation rates in Indonesia. The tower lease expense charged to operations as part of “Operating Expenses - Cost of Services” amounted to Rp47,636 and Rp38,831 for the nine months ended September 30, 2011 and 2010, respectively.
The agreement is cancellable before termination under certain conditions, as stated in the agreements.
i.
On May 25, 2007, the Company and six other telecommunications operators signed a memorandum of understanding on the construction of the national optical fiber network Palapa Ring for the eastern part of Indonesia (“Palapa Ring Project Phase I”) wherein the Company will share 10% of the total project cost of Rp3,000,000. In addition, they also agreed to equally bear the cost of preparation and implementation (“preparation cost”) of Palapa Ring Project Phase I up to the amount of Rp2,000. If the preparation cost exceeds Rp2,000, there will be further discussion among them. However, one of the telecommunications operators subsequently decided not to join the project.
On November 10, 2007, the Company and the other five telecommunications operators (including Telkom, a related party) signed the agreement on the consortium for the construction and maintenance of Palapa Ring wherein the Company agreed to bear 13.36% of the total project cost of US$225,037. This agreement replaced the previous memorandum of understanding.
Furthermore, three of the telecommunications operators also no longer joined the project. Consequently, as of September 30, 2011, the remaining telecommunications operators which are still committed to this project are the Company, Telkom and Bakrie Telecom. Hence, the project’s commitment is being evaluated to accommodate the change in the number of participating telecommunications operators.
As of September 30, 2011, the Company has paid the amount of US$1,503 which is recorded as part of other non-current financial assets.
j.
The Company and IMM have committed to pay annual radio frequency fee over the 3G and BWA licenses period, provided the Company and IMM hold the 3G and BWA licenses. The amount of annual payment is based on the payment scheme set out in Regulations
No. 7/PER/M.KOMINFO/2/2006, No. 268/KEP/M.KOMINFO/9/2009 and No. 237/KEP/ M.KOMINFO/7/2009 dated February 8, 2006, September 1, 2009 and July 27, 2009, respectively, of the MOCIT.
k.
On July 20, 2005, the Company obtained facilities from HSBC to fund the Company’s short-term working capital needs. This agreement has been amended several times. On September 20, 2011, these facilities were further amended to extend the expiration date up to April 30, 2012 and the change interest rate and certain provisions in the agreement as follows:
·
Overdraft facility amounting to US$2,000 (including overdraft facility denominated in rupiah amounting to Rp17,000). Interest is charged on daily balances at 3.75% per annum and 6% per annum below the HSBC Best Lending Rate for the loan portions denominated in rupiah and U.S. dollar, respectively.
32. SIGNIFICANT AGREEMENTS AND COMMITMENTS (continued)
·
Revolving loan facility amounting to US$30,000 (including revolving loan denominated in rupiah amounting to Rp255,000). The loan matures within a maximum period of 180 days and can be drawn in tranches with minimum amounts of US$500 and Rp500 for loans denominated in U.S. dollar and rupiah, respectively. Interest is charged on daily balances at 2.25% per annum above the HSBC Cost of Fund Rate for the loans denominated either in rupiah or U.S. dollar.
·
These facilities are considered uncommitted facility based on guidelines issued by Central Bank of Indonesia No.12/516/DPNP/DPnP dated September 21, 2010, consequently, these facilities can be automatically cancelled by HSBC in the event that the Company’s credit collectibility is declining to substandard, doubtful or loss based on HSBC’s assessment pursuant to the general criteria set out by Central Bank of Indonesia.
a.
In 1994, the Company was appointed as a Financial Administrator (“FA”) by a consortium which was established to build and sell/lease Asia Pacific Cable Network (“APCN”) submarine cable in countries in the Asia-Pacific Region. As an FA, the Company collected and distributed funds from the sale of APCN’s Indefeasible Right of Use (“IRU”), Defined Underwritten Capacity (“DUC”) and Occasional Commercial Use (“OCU”).
The funds received from the sale of IRU, DUC and OCU and for upgrading the APCN cable did not belong to the Company and, therefore, were not recorded in the Company’s books. However, the Company managed these funds in separate accounts.
As of September 30, 2011, the balance of the funds (including interest earned) which are under the Company’s custody amounted to US$5,884. Besides receiving their share of the funds from the sale of IRU, DUC and OCU, the members of the consortium also received their share of the interest earned by the above funds.
b.
Other agreements made with Telkom are as follows:
·
Under a cooperation agreement, the compensation to Telkom relating to leased circuit/channel services, such as world link and bit link, is calculated at 15% of the Company’s collected revenues from such services.
The Company and Satelindo also lease circuits from Telkom to link Jakarta, Medan and Surabaya.
·
In 1994, Satelindo entered into a land transfer agreement for the transfer of Telkom’s rights to use a 134,925-square meter land property located at Daan Mogot, West Jakarta, where Satelindo’s earth control station is currently situated. The land transfer agreement enables Satelindo to use the land for a period of 30 years from the date of the agreement, for a price equivalent to US$40,000 less Rp43,220. The term of agreement may be extended based on mutual agreement.
The agreement was subsequently superseded by a land rental agreement dated December 6, 2001, generally under the same terms as those of the land transfer agreement.
·
In 1999, Lintasarta entered into an agreement with Telkom, whereby Telkom agreed to lease transponder to Lintasarta. This agreement has been amended several times, the latest amendment of which is based on the ninth amendment agreement dated May 24, 2010. Transponder lease expense charged to operations amounting to Rp16,436 and Rp21,673 in 2011 and 2010, respectively, is presented as part of “Operating Expenses - Cost of Services” in the consolidated statements of comprehensive income.
33.
TARIFF SYSTEM
a.
International telecommunications services
The service rates (“tariffs”) for overseas exchange carriers are set based on the international telecommunications regulations established by the International Telecommunications Union (“ITU”).
These regulations require the international telecommunications administrations to establish and revise, under mutual agreement, accounting rates to be applied among them, taking into account the cost of providing specific telecommunications services and relevant recommendations from the Consultative Committee on International Telegraph and Telephone (“CCITT”). The rates are divided into terminal shares payable to the administrations of terminal countries and, where appropriate, into transit shares payable to the administrations of transit countries.
The ITU also regulates that the monetary unit to be used, in the absence of special arrangements, shall be the Special Drawing Right (“SDR”) or the Gold Franc, which is equivalent to 1/3.061SDR. Each administration shall, subject to applicable national law, establish the charges to be collected from its customers.
The tariffs billed to domestic subscribers for international calls originating in Indonesia, also known as collection rates, are established in a decision letter of the MOC, which rates are generally higher than the accounting rates. During the period 1996 to 1998, the MOC made tariff changes effective January 1, 1997, March 15, 1998 and November 15, 1998.
Based on Decision Letter No. 09/PER/M.KOMINFO/02/06 dated February 28, 2006 of the MOCIT, the collection rates are set by tariff formula known as price cap formula which already considers customer price index starting January 1, 2007.
b.
Cellular services
The basic telephony tariffs for cellular mobile network service are set on the basis of Regulation No. 12/PER/M.KOMINFO/ 02/2006 dated February 28, 2006 of the MOCIT. Under this regulation, the cellular tariffs consist of the following:
·
Connection fee
·
Monthly charges
·
Usage charges
·
Additional facilities fee
Cellular providers should implement the new tariffs referred to as “floor price”. For usage charges, the floor price should be the originating fee plus termination fee (total interconnection fee), while for connection fee and monthly charges, the floor price depends on the cost structure of each cellular provider.
On April 7, 2008, the MOCIT issued Ministerial Decree No. 09/PER/M.KOMINFO/04/2008 about guidelines on calculating basic telephony service tariffs through cellular mobile network. Under this new Decree, the cellular providers should implement the new tariffs referred to as “price cap”. The types of tariffs for telecommunications services through cellular network consist of the following:
·
Tariff for basic telephony services
·
Tariff for roaming
·
Tariff for multimedia services
The retail tariffs should be calculated based on Network Element Cost, Activation Cost of Retail Services and Profit Margin.
The implementation of the new tariffs for a dominant operator has to be approved by the Government. A dominant operator is an operator that has revenue of more than 25% of the total industry revenue for a certain segment.
Starting May 2008, the Company has fully adopted the new cellular tariff system.
33. TARIFF SYSTEM (continued)
c.
Fixed telecommunications services
In February 2006, the MOCIT released Regulation No. 09/PER/M.KOMINFO/02/2006 regarding basic telephony tariffs for fixed network service.
On April 30, 2008, the MOCIT issued Ministerial Decree No. 15/PER/M.KOMINFO/04/2008 about the guidelines on calculating basic telephony service tariffs through fixed network. This Decree also applies to fixed wireless access (FWA) network.
Under this new decree, the tariffs for basic telephony services and SMS (short message service) must be calculated based on the formula stated in the Decree. The fixed network providers should implement the new tariffs referred to as “price cap”.
Starting May 2008, the Company has fully adopted the new fixed telecommunications tariff system.
34.
INTERCONNECTION TARIFFS, USO, SPECTRUM FREQUENCY FEES AND REVENUE SHARING
Interconnection tariffs among domestic telecommunications operators are regulated by the MOC through its Decree No. KM.108/PR.301/MPPT-94 dated December 28, 1994. The Decree was updated several times with the latest update being Decree No. KM.37 Year 1999 (“Decree No. 37”) dated
June 11, 1999. This Decree, along with Decree No. KM.46/PR.301/MPPT-98 (“Decree No. 46”) dated February 27, 1998, prescribed interconnection tariff structures between mobile cellular telecommunications network and Public Switched Telephone Network (“PSTN”), mobile cellular telecommunications network and international telecommunications network, mobile cellular telecommunications network and other domestic mobile cellular telecommunications network, international telecommunications network and PSTN, and between two domestic PSTNs.
Based on the Decree of the MOC, the interconnection tariff arrangements are as follows:
1.
Structure of Interconnection Tariffs
a. Between international and domestic PSTN
Based on Decree No. 37 dated June 11, 1999, the interconnection tariffs are as follows:
Tariff
Basis
Access charge
Rp850 per call
Number of successful outgoing
and incoming calls
Usage charge
Rp550 per paid minute
Duration of successful outgoing
and incoming calls
b.
Between domestic PSTN and another domestic PSTN
Interconnection charges for domestic telecommunications traffic (local and long-distance) between a domestic PSTN and another domestic PSTN are based on agreements made by those domestic PSTN telecommunications carriers.
80
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
34.
INTERCONNECTION TARIFFS, USO, SPECTRUM FREQUENCY FEES AND REVENUE SHARING (continued)
1.
Structure of Interconnection Tariffs (continued)
c.
Between cellular telecommunications network and domestic PSTN
Based on Decree No. 46 dated February 27, 1998 which became effective starting April 1, 1998,
the interconnection tariffs are as follows :
(1)
Local Calls
For local calls from a cellular telecommunications network to a PSTN subscriber,
the cellular operator pays the PSTN operator 50% of the prevailing tariffs for local calls.
For local calls from the PSTN to a cellular subscriber, the cellular operator receives
the airtime charged by the PSTN operator to its subscribers.
(2)
SLJJ
For SLJJ which originates from the PSTN to a cellular subscriber, the cellular operator receives a portion of the prevailing SLJJ tariffs, which portion ranges from 15% of
the prevailing SLJJ tariffs plus the airtime charges in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariffs plus the airtime charges in cases where the entire long-distance portion is carried by the cellular operator.
For SLJJ which originates from a cellular telecommunications network to a PSTN subscriber, the cellular operator is entitled to retain a portion of the prevailing SLJJ tariffs, which portion ranges from 15% of the tariffs in cases where the entire long-distance portion is not carried by the cellular operator, to 60% of the tariffs in cases where the entire long-distance portion is carried by the cellular operator.
d.
Between cellular telecommunications network and another cellular telecommunications network
Based on Decree No. 46, the interconnection tariffs are as follows:
(1)
Local Calls
For local calls from a cellular telecommunications network to another, the “origin” cellular operator pays the airtime to the “destination” cellular operator. If the call is carried by
a PSTN, the cellular operator pays the PSTN operator 50% of the prevailing tariffs for local calls.
(2)
SLJJ
For SLJJ which originates from a cellular telecommunications network, the cellular operator is entitled to retain a portion of the prevailing SLJJ tariffs, which portion ranges from 15% of the tariffs in cases where the entire long-distance portion is not carried by
the cellular operator, to 85% of the tariffs in cases where the entire long-distance portion is carried by the cellular operator and the call is delivered to another cellular operator, and to 100% if the call is delivered to the same cellular operator.
34.
INTERCONNECTION TARIFFS, USO, SPECTRUM FREQUENCY FEES AND REVENUE SHARING (continued)
1.
Structure of Interconnection Tariffs (continued)
e.
Between international PSTN and cellular telecommunications network
Starting in 1998, the interconnection tariffs for international cellular call traffic to/from overseas from/to domestic cellular subscribers, regardless of whether the traffic is made through domestic PSTN or not, is based on the same tariffs applied to traffic made through domestic PSTN as discussed in “a” above. However, as agreed mutually with the cellular telecommunications operators, the Company (including Satelindo until it was merged - Note 1e) still applied the original contractual sharing agreements regarding the interconnection tariffs until December 31, 2006 (Note35).
f.
Between international gateway exchanges
Interconnection charges for international telecommunications traffic between international gateway exchanges are based on agreements between international telecommunications carriers and international telecommunications joint ventures.
Decree No. 37 and Decree No. 46 were subsequently superseded by Decree No. 32 Year 2004 of the MOC which provides cost-based interconnection to replace the current revenue-sharing arrangement. Under the new Decree, the operator of the network on which calls terminate determines the interconnection charge to be received by it based on a formula mandated by the Government, which is intended to have the effect of requiring that operators charge for calls based on the cost of carrying such calls.
The effective date of the new Decree, which was originally set to start on January 1, 2005, was subsequently postponed until January 1, 2007 based on Regulation No. 08/PER/M.KOMINFO/02/2006 dated February 8, 2006 of the MOCIT (Note 35).
The implementation of interconnection billing between operators starts from the time they sign their interconnection agreements. All interconnection agreements will be based on Reference Interconnection Offer (“RIO”). All operators have to publish their RIO and a dominant operator is required to obtain an approval of its RIO from the Government.
On August 4, 2006, the DGPT issued Decree No. 278/DIRJEN/2006, which approved the RIO of the Company and two other dominant telecommunications operators (Telkom and Telkomsel). This decree was implemented since January 1, 2007 as agreed by all operators and approved by the Government. On April 11, 2008, the DGPT approved the new RIO for dominant operators (Telkom, Telkomsel and the Company). The DGPT requires all domestic operators to amend their interconnection agreements in line with the approved new RIO starting April 1, 2008. On April 1, 2008, the Company implemented the new interconnection tariffs based on the approved RIO.
However, on December 31, 2010, theBadan Regulasi Telekomunikasi Indonesia (BRTI or Indonesian Telecommunications Regulatory Bureau) issued letter No. 227/BRTI/XII/2010 regarding the implementation of new interconnection tariffs based on the implementation of cost-based interconnection fees, which will be used by all telecommunications operators effective January 1, 2011. The Company has adopted the new tariff starting January 1, 2011.
On June 27, 2011, MOCIT issued Regulation No.16/PER/M.KOMINFO/06/2011 regarding the amendment of Ministry of Transport Decree No.35 Year 2004 on implementation of local fixed wireless network with limited mobility, which encouraged the implementation of cost-based tariffs by all telecommunications operators effective July 1, 2011.
34.
INTERCONNECTION TARIFFS, USO, SPECTRUM FREQUENCY FEES AND REVENUE SHARING (continued)
2.
USO and Spectrum Frequency Fees
On January 16, 2009, the Government issued Regulation No. 7 Year 2009 increasing the USO development contribution from 0.75% to 1.25% and decreasing the concession fee from 1% to 0.50% of annual gross revenue (after deducting bad debts and interconnection charges) effective January 1, 2009.
On December 13, 2010, the President of the Republic of Indonesia issued PP No.76/2010 regarding the amendment of PP No.7/2009 on types and tariffs of non-tax state income applicable at MOCIT. This regulation affects the computation method and payment of the spectrum fee allocated to the Company (800 Mhz, 900 Mhz and 1,800 Mhz frequency bands).
3.
RevenueSharing
Revenue from access and usage charges from international telecommunications traffic with telecommunications networks owned by more than one domestic telecommunications carrier which is not regulated by Decree No. 08/PER/M.KOMINFO/02.2006, is to be proportionally shared with each carrier, which proportion is to be bilaterally arranged between the carriers.
35.
INTERCONNECTION AGREEMENTS
The Company (including Satelindo and IM3 until they were merged - Note 1e) has interconnection arrangements with domestic and overseas operators. Some significant interconnection agreements are as follows:
1.
Telkom
The following are significant interconnection agreements/transactions with Telkom:
a.
Fixed telecommunications services
On September 23, 2005, the Company and Telkom signed an agreement regarding the interconnection of local, long-distance and international fixed networks. The principal matters covered by the agreement are as follows:
·
Interconnection between the Company’s and Telkom’s local, long-distance and international fixed networks enables the Company’s fixed telecommunications service subscribers to make or receive calls to or from Telkom’s subscribers or international gateways.
·
The Company’s and Telkom’s international services are accessible and continuously open to each other’s fixed networks.
·
The Company and Telkom are responsible for their respective telecommunications facilities.
·
The compensation arrangement for the services provided is based on interconnection tariffs determined by both parties.
·
Each party handles subscriber billing and collection for the other party’s international calls service used by the other party’s subscribers. Each party has to pay the other party 1% of the collections made by the other party, plus the billing process expenses which are fixed at Rp82 per record of outgoing call as compensation for billing processing. However, the collection and billing process expense was changed to “service charge”, which was computed at Rp1,250 per minute of outgoing call starting April 1, 2008. Based on the latest agreement, the service charge rate has been reduced to Rp1,200 per minute of outgoing call starting January 1, 2009.
35.
INTERCONNECTION AGREEMENTS (continued)
1.
Telkom (continued)
a.
Fixed telecommunications services (continued)
On December 28, 2006, the Company entered into a memorandum of understanding
with Telkom applying the new interconnection rates under cost-based regime that were
effective starting January 1, 2007. This memorandum of understanding was replaced by the agreement dated December 18, 2007. This agreement was amended several times. The
latest amendment was dated July 20, 2011 to meet the requirement in the BRTI letter
No. 227/BRTI/XII/2010 dated December 31, 2010 regarding the implementation of new interconnection tariff in 2011. The Company has adopted the new tariff starting January 1, 2011.
b.
Cellular Services
On December 1, 2005, the Company and Telkom signed an agreement regarding the interconnection between the Company’s cellular telecommunications network and Telkom’s fixed telecommunications network. Under this agreement, the interconnection between the Company’s cellular telecommunications network and Telkom’s fixed telecommunications network enables the Company’s cellular subscribers to make or receive calls to or from Telkom’s fixed telecommunications subscribers.
On December 28, 2006, the Company entered into a memorandum of understanding
with Telkom applying the new interconnection rates under cost-based regime that are effective starting January 1, 2007. This memorandum of understanding was replaced by an agreement dated December 18, 2007. This agreement was amended several times. The latest amendment was dated July 20, 2011 to meet the requirement in the BRTI letter No. 227/BRTI/XII/2010 dated December 31, 2010 regarding the implementation of new interconnection tariff in 2011. The Company has adopted the new tariff starting January 1, 2011.
2.
XL Axiata, PT Smartfren Telecom Tbk (previously PT Mobile-8 Telecom Tbk) (“Smartfren”) and Telkomsel
The principal matters covered by the agreements with these operators are as follows:
·
The Company’s and Satelindo’s international gateway exchanges are interconnected with the mobile cellular telecommunications operators’ networks to make outgoing or receive incoming international calls through the Company’s and Satelindo’s international gateway exchanges.
·
The Company and Satelindo receive, as compensation for the interconnection, a portion of
the cellular telecommunications operators’ revenues from the related services that are made through the Company’s and Satelindo’s international gateway exchanges.
·
Satelindo and IM3 also have an agreement with the above operators for the interconnection of Satelindo’s and IM3’s GSM mobile cellular telecommunications network with the above operators’ network, enabling the above operators’ customers to make calls/send SMS to or receive calls/SMS from Satelindo’s and IM3’s customers.
·
The agreements are renewable annually.
The Company (including Satelindo and IM3 until they were merged - Note 1e) and the above operators still continue their business under the agreements by applying the original compensation formula, except for interconnection fee.
35.
INTERCONNECTION AGREEMENTS (continued)
2.
XL Axiata, PT Smartfren Telecom Tbk (previously PT Mobile-8 Telecom Tbk) (“Smartfren”) and Telkomsel (continued)
On December 8, 27 and 28, 2006, the Company entered into a memorandum of understanding with each of Telkomsel, Smartfren and XL Axiata, respectively, applying the new interconnection rates under cost-based scheme effective January 1, 2007 to comply with Regulation No. 08/PER/M.KOMINFO/02/2006 of the MOCIT. The memoranda of understanding with each of Mobile-8, XL Axiata and Telkomsel were replaced by agreements dated September 14, and December 17 and 19, 2007, respectively. The agreements with Smartfren and XL Axiata were amended on March 31, 2008, while the agreement with Telkomsel was amended on February 18, 2008. Subsequently, the agreements with Smartfren and XL Axiata were further amended on March 15, 2011 and March 3, 2011, respectively, while the agreement with Telkomsel was further amended on July 19, 2011, to meet the requirement in the BRTI letter No. 227/BRTI/XII/2010 dated December 31, 2010 regarding the implementation of new interconnection tariff in 2011. The Company has adopted the new tariff starting January 1, 2011.
3.
PT Bakrie Telecom Tbk (“Bakrie Telecom”)
The principal matters covered by the latest amendment of the agreement dated June 10, 2009 are related to interconnection of the Company’s mobile cellular network and international gateway exchanges to Bakrie Telecom’s network, including SLI 009 network. Subsequently, the agreement with Bakrie Telecom was further amended on February 9, 2011 to meet the requirement in the BRTI letter No. 227/BRTI/XII/2010 dated December 31, 2010 regarding the implementation of new interconnection tariff in 2011. The Company has adopted the new tariff starting January 1, 2011.
Net interconnection revenues (charges) from (to) major operators for the nine months ended September 30, 2011 and 2010 are as follows:
2011
2010
Telkom
98,628
121,377
Smartfren
5,670
7,952
Telkomsel
(109,237
)
(124,098
)
XL Axiata
(94,242
)
(72,846)
Bakrie Telecom
(2,143
)
(4,051)
Net charges
(101,324
)
(71,666
)
81
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
36.
SEGMENT INFORMATION
The Group manages and evaluates its operations in three major reportable segments: cellular, fixed telecommunications and MIDI. The operating segments are managed separately because each offers different services/products and serves different markets. The Group operates in one geographical area only, so no geographical information on segments is presented.
Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Expenditures for segment assets represent the total costs incurred during the period to acquire segment assets that are expected to be used for more than one year.
Consolidated information by industry segment follows:
Major Segments
Fixed
Segment
Cellular
Telecommunications
MIDI
Total
Nine months ended September 30, 2011
Operating revenues
Revenues from external customers
12,587,109
936,331
1,837,070
15,360,510
Inter-segment revenues
-
-
444,223
444,223
Total operating revenues
12,587,109
936,331
2,281,293
15,804,733
Inter-segment revenues elimination
(444,223)
Operating revenues - net
15,360,510
Income
Operating income (loss)
2,190,129
(165,843)
282,431
2,306,717
Gain on foreign exchange - net
395,687
Gain on change in fair value of derivatives - net
89,998
Interest income
61,634
Financing cost
(1,357,969
)
Income tax expense
(400,404
)
Others - net
(39,504
)
Profit for the period
1,056,159
Depreciation and amortization
4,085,315
220,894
535,146
4,841,355
As of September 30, 2011
Other Information
Segment assets
44,711,799
1,828,573
8,481,855
55,022,227
Unallocated assets
3,255,481
Inter-segment assets elimination
(7,738,694)
Assets - net
50,539,014
Segment liabilities
24,333,475
642,148
2,974,22627,949,849
Unallocated liabilities
9,730,550
Inter-segment liabilities elimination
(6,081,826)
Liabilities - net
31,598,573
Capital expenditures
3,269,035
139,402
536,050
3,944,487
82
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
36.
SEGMENT INFORMATION (continued)
Major Segments
Fixed
Segment
Cellular
Telecommunications
MIDI
Total
Nine months ended September 30, 2010
Operating revenues
Revenues from external customers
12,015,865
1,016,338
1,810,876
14,843,079
Inter-segment revenues
-
-
448,399
448,399
Total operating revenues
12,015,865
1,016,338
2,259,275
15,291,478
Inter-segment revenues elimination
(448,399
)
Operating revenues - net
14,843,079
Income
Operating income (loss)
2,372,215
(114,692
)
284,147
2,541,670
Gain on foreign exchange - net
589,156
Interest income
113,166
Financing cost
(1,745,054)
Loss on change in fair value of derivatives - net
(378,431)
Income tax expense
(293,179)
Amortization of goodwill
(169,880)
Others - net
(77,085)
Profit for the period
580,363
Depreciation and amortization
3,714,450
225,341
625,829
4,565,620
As of December 31, 2010
Other Information
Segment assets
45,875,021
2,020,957
8,459,94856,355,926
Unallocated assets
4,264,808
Inter-segment assets elimination
(7,802,547)
Assets - net
52,818,187
Segment liabilities
27,195,689
630,442
3,250,61531,076,746
Unallocated liabilities
9,724,480
Inter-segment liabilities elimination
(6,219,525)
Liabilities - net
34,581,701
Capital expenditures
4,455,608
210,770
848,6115,514,989
37.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
a.
Risk Management
The main risks arising from the Group’s financial instruments are interest rate risk, foreign exchange rate risk, equity price risk, credit risk and liquidity risk. The importance of managing these risks has significantly increased in light of the considerable change and volatility in both Indonesian and international financial markets. The Company’s Board of Directors reviews and approves the policies for managing these risks which are summarized below.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to its loans and bonds payable with floating interest rates.
The Company’s policies relating to interest rate risk are as follows:
(1)
Manage interest cost through a mix of fixed and variable rate debts. The Company evaluates the fixed to floating rate ratio of its loans and bonds payable in line with movements of relevant interest rates in the financial markets. Based on management’s assessment, new financing will be priced either on a fixed or floating rate basis.
(2)
Manage interest rate exposure on its loans and bonds payables by entering into interest rate swap contracts.
As of September 30, 2011, more than 69% of the Group’sdebts are fixed-rated.
Several interest rate swap contracts are entered into to hedge floating rate U.S. dollar debts. These contracts are accounted for as transactions not designated as hedges, wherein the changes in the fair value are credited or charged directly to the consolidated statement of comprehensive income for the period.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s consolidated statement of comprehensive income for the nine months ended September 30, 2011 (through the impact on floating rate borrowings which is based on LIBOR for U.S. dollar borrowings and on JIBOR for rupiah borrowings).
Increase/decrease in basis points: U.S. dollar Rupiah | 29 48 |
Effect on consolidated profit for the period: | |
U.S. dollar Rupiah | US$871 (equivalent to Rp7,688 ) Rp7,563 |
Management conducted a survey among the Group’s banks to determine the outlook of the LIBOR and JIBOR interest rates until the Group’s next reporting date of December 31, 2011. The outlook is that the LIBOR and JIBOR interest rates may move 29 and 48 basis points, respectively, higher or lower than the interest rates at the end of the third quarter of 2011.
37.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
a.
Risk Management (continued)
Interest rate risk (continued)
If LIBOR interest rates were 29 basis points higher or lower than the market levels for the nine months ended September 30, 2011, with all other variables held constant, the Group’s net comprehensive income for the period and equity would be Rp984,331 or Rp999,707 and Rp18,512,599 or Rp18,527,975, respectively, which are lower or higher than the actual results for the nine months ended September 30, 2011, mainly due to the higher or lower interest expense on floating rate borrowings.
If JIBOR interest rates were 48 basis points higher or lower than the market levels for the nine months ended September 30, 2011, with all other variables held constant, the Group’s net comprehensive income for the period and equity would be Rp984,456 or Rp999,582 and Rp18,512,724 or Rp18,527,850, respectively, which are lower or higher than the actual results for the nine months ended September 30, 2011, mainly due to the higher or lower interest expense on floating rate borrowings.
Foreign exchange rate risk
Foreign exchange rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to exchange rate fluctuations results primarily from U.S. dollar-denominated loans and bonds payable, accounts receivable, accounts payable and procurement payable.
To manage foreign exchange rate risks, the Company entered into several cross currency swap and currency forward contracts and other permitted instruments, if considered necessary. These contracts are accounted for as transactions not designated as hedges, wherein the changes in the fair value are credited or charged directly to the consolidated statement of comprehensive income for the period.
The Group’s accounts payable are primarily foreign currency net settlement payables to foreign telecommunications operators, while most of the Group’s accounts receivable are Indonesian rupiah-denominated collectibles from domestic operators.
To the extent the Indonesian rupiah depreciates further from the exchange rates in effect at
September 30, 2011, the Group’s obligations under such loans and bonds payable, accounts payable and procurement payable will increase in Indonesian rupiah terms. However, the increases in these obligations will be offset in part by increases in the values of foreign currency-denominated time deposits and accounts receivable. As of September 30, 2011, 34.59% of the Group’s U.S. dollar-denominated debts were insured from exchange rate risk by entering into several cross currency swap and currency forward contracts.
37.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
a.
Risk Management (continued)
Foreign exchange rate risk (continued)
The following table shows the Group’s consolidated U.S. dollar-denominated assets and liabilities as of September 30, 2011:
U.S. Dollar | Rupiah* | |||
Assets: | ||||
Cash and cash equivalents | 55,819 | 492,495 | ||
Accounts receivable - trade | 99,127 | 874,593 | ||
Derivative assets | 26,235 | 231,468 | ||
Other current financial assets | 1,876 | 16,553 | ||
Other current assets | 15 | 134 | ||
Due from related parties | 368 | 3,246 | ||
Other non-current financial assets | 1,529 | 13,492 | ||
Total assets | 184,969 | 1,631,981 | ||
Liabilities: | ||||
Accounts payable - trade | 15,223 | 134,311 | ||
Procurement payable | 238,866 | 2,107,517 | ||
Accrued expenses | 27,822 | 245,472 | ||
Deposits from customers | 2,413 | 21,291 | ||
Derivative liabilities | 20,757 | 183,136 | ||
Other current liabilities | 6,330 | 55,847 | ||
Other current financial liabilities | 17 | 151 | ||
Loans payable (including current maturities) | 775,009 | 6,837,907 | ||
Bonds payable (including current maturities) | 650,000 | 5,734,950 | ||
Other non-current liabilities | 8,730 | 77,027 | ||
Total liabilities | 1,745,167 | 15,397,609 | ||
Net liabilities position | 1,560,198 | 13,765,628 |
*
The exchange rate used to translate the U.S. dollar amounts into rupiah was Rp8,823 to US$1 (in full amounts) as published by the Indonesian Central Bank as of September 30, 2011.
The following table demonstrates the sensitivity to a reasonably possible change in the U.S. dollar exchange rate, with all other variables held constant, of the Group’s consolidated statement of comprehensive income for the nine months ended September 30, 2011:
Change in U.S. dollar exchange rate | 7.58% | |
Effect on consolidated profit for the period | (782,576) |
Management conducted a survey among the Group’s banks to determine the outlook of the U.S. dollar exchange rate until the Group’s next reporting date of December 31, 2011. The outlook is that the U.S. dollar exchange rate may strengthen by 7.58% as compared to the exchange rate at
September 30, 2011.
If the U.S. dollar exchange rate strengthens by 7.58% as compared to the exchange rate as of September 30, 2011, with all other variables held constant, the Group’s net comprehensive income for the nine months ended September 30, 2011 would be Rp209,444, which is lower than the actual results mainly due to the consolidated net foreign exchange loss on the translation of U.S. dollar-denominated net liabilities.
83
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
37.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
a.
Risk Management (continued)
Equity price risk
The Group’s long-term investments consist primarily of minority investment in the equity of private Indonesian companies and equity of foreign companies. With respect to the Indonesian companies in which the Group has investments, the financial performance of such companies may be adversely affected by the economic conditions in Indonesia.
Credit risk
Credit risk is the risk that the Group will incur a loss arising from its customers, clients or counterparties that fail to discharge their contractual obligations. There are no significant concentrations of credit risk. The Group manages and controls this credit risk by setting limits on the amount of risk it is willing to accept for individual customers and by monitoring exposures in relation to such limits.
The Group trades only with recognized and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis to reduce the exposure to bad debts.
The table below shows the maximum exposure to credit risk for the components of the consolidated statement of financial position as of September 30, 2011:
Maximum
Exposure (1)
Loans and receivables:
Cash and cash equivalents
1,809,127
Accounts receivable
Trade - net
1,444,700
Others - net
10,864
Other current financial assets - net
35,351
Due from related parties - net
10,124
Other non-current financial assets - others
88,950
Held-for-trading:
Cross currency swaps
17,754
Currency forward
213,714
Available-for-sale investments:
Other non-current financial assets -
other long-term investments - net
2,730
Total
3,633,314
(1)
There are no collaterals held or other credit enhancements or offsetting arrangements that affect this maximum exposure.
Liquidity risk
Liquidity risk is defined as the risk when the cash flow position of the Group indicates that the short-term revenue is not enough to cover the short-term expenditure.
The Group’s liquidity requirements have historically arisen from the need to finance investments and capital expenditures related to the expansion of its telecommunications business. The Group’s telecommunications business requires substantial capital to construct and expand mobile and data network infrastructure and to fund operations, particularly during the network development stage.Although
84
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
37.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
a.
Risk Management (continued)
Liquidity risk (continued)
Although the Group has substantial existing network infrastructure, the Group expects to incur additional capital expenditures primarily in order to focus cellular network development in areas it anticipates will be high-growth areas, as well as to enhance the quality and coverage of its existing network.
In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate to finance the Group’s operations and to mitigate the effects of fluctuation in cash flows. The Group also regularly evaluates the projected and actual cash flows, including its loan maturity profiles, and continuously assesses conditions in the financial markets for opportunities to pursue fund-raising initiatives. These activities may include bank loans, debt capital and equity market issues.
The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments.
Expected maturity as of September 30,
Discount/
debt
Carrying
issuance
value
costs and
as of
2016
consent
September
and
solicitation
30,
2012
2013
2014
2015
thereafter
Total
fees2011
Short-term loan
300,000
-
-
-
-
300,000
(1,484)
298,516
Accounts payable - trade
553,625
-
-
-
-
553,625
-553,625
Procurement payable
3,378,681
-
-
-
-
3,378,681
-3,378,681
Accrued expenses
1,506,372
-
-
-
-
1,506,372
-1,506,372
Deposits from customers
28,078
-
-
-
-
28,078-28,078
Derivative liabilities
183,136
-
-
-
-
183,136
-183,136
Other current financial liabilities
43,851
-
-
-
-
43,851
-43,851
Due to related parties
-
13,415
-
-
-
13,415-13,415
Loans payable
In rupiah
2,029,983
434,300
200,000
-
-
2,664,283(18,194
)
2,646,089
In U.S. dollar
1,875,048
2,369,293
610,500
610,500
1,372,566
6,837,907(156,116
)6,681,791
Total loans payable
3,905,031
2,803,593
810,500
610,500
1,372,566
9,502,190(174,310
)
9,327,880
Bonds payable
In rupiah
41,989
1,330,000
1,630,000
1,048,000
2,342,000
6,391,989(22,846)6,369,143
In U.S. dollar
-
-
-
-
5,734,950
5,734,950(87,095)5,647,855
Total bonds payable
41,989
1,330,000
1,630,000
1,048,000
8,076,950
12,126,939(109,941)12,016,998
Total
9,940,763
4,147,008
2,440,500
1,658,500
9,449,51627,636,287
(285,735
)27,350,552
b.
Collateral
The loans of Lintasarta, a subsidiary, which were obtained from CIMB Niaga, are collateralized by all equipment (Notes 8, 18j and 18l) purchased by Lintasarta from the proceeds of the credit facilities. There are no other significant terms and conditions associated with the use of collateral.
The Company did not hold any collateral as of September 30, 2011.
85
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
38.
EVENTS AFTER REPORTING PERIOD
a.
On October 5, 2011, the memorandum of understanding between the Company and Asia Broadcast Satellite, Ltd. to procure a new satellite (Note 32d) expired and no further agreement was made.
b.
On October 10, 2011, the Company received Pefindo’s affirmation on the rating of the Company’s local bonds and sukuk atidAA+ (stable outlook) andidAA(sy)+ (stable outlook), respectively.
c.
On October 11, 2011, the Company entered into a memorandum of understanding with XL Axiata to cooperate in joint sharing of indoor coverage (“PICO sharing”) owned by each party, including procurement, operation and maintenance.
d.
As of October 17, 2011, SKAGEN Funds, a stockholder, increased its ownership in the Company to 5.60% (Note 23).
e.
On October 25, 2011, the Company submitted a request letter to extend the maturity date of the loan drawdowned become February 2, 2012 from the Revolving Time Loan facility from Mandiri (Note 14).
f.
As of October 25, 2011, the prevailing exchange rate of the rupiah to U.S. dollar is Rp8,865 to US$1 (in full amounts), while as of September 30, 2011, the prevailing exchange rate was Rp8,823 to US$1 (in full amounts). Using the exchange rate as of October 25, 2011, the Group incurred foreign exchange loss amounting to approximately Rp65,528 (excluding the effect of revaluing derivative contracts on October 25, 2011) on the foreign currency liabilities, net of foreign currency assets, as of September 30, 2011 (Note 37).
The translation of the foreign currency liabilities, net of foreign currency assets, should not be construed as a representation that these foreign currency liabilities and assets have been, could have been, or could in the future be, converted into rupiah at the prevailing exchange rate of the rupiah to U.S. dollar as of September 30, 2011 or at any other rate of exchange.
The commitments for the capital expenditures denominated in foreign currencies as of September 30, 2011 as disclosed in Note 32a are approximately Rp1,565,586 if translated at the prevailing exchange rate as of October 25, 2011.
39. RECENT DEVELOPMENTS AFFECTING ACCOUNTING STANDARDS AND INTERPRETATIONS
The revised and new accounting standards and interpretations issued by DSAK up to the date of completion of the Group’s interimconsolidated financial statements which are relevant to the Group but not yet effective as of September 30, 2011 are summarized below:
Effective for financial statements starting on or after January 1, 2012:
·
PSAK 10 (Revised 2010), “The Effects of Changes in Foreign Exchange Rates”, 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.
·
PSAK 18 (Revised 2010), “Accounting and Reporting by Retirement Benefit Plans”, provides guidance on the accounting and reporting by plans to all participants as a group. This PSAK complements PSAK 24 (Revised 2010), “Employee Benefits”.
·
PSAK 24 (Revised 2010), “Employee Benefits”, establishes the accounting and disclosures for employee benefits.
·
PSAK 34 (Revised 2010), “Accounting for Construction Contracts”, prescribes the accounting treatment of revenue and costs associated with construction contracts.
86
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
39. RECENT DEVELOPMENTS AFFECTING ACCOUNTING STANDARDS AND INTERPRETATIONS (continued)
Effective for financial statements starting on or after January 1, 2012 (continued):
·
PSAK 46 (Revised 2010), “Accounting for Income Taxes”, 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 statements of financial position; and transactions and other events of the current period that are recognized in the financial statements.
·
PSAK 50 (Revised 2010), “Financial Instruments: Presentation”, establishes the principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and financial liabilities.
·
PSAK 53 (Revised 2010), “Share-based Payment”, specifies the financial reporting by an entity when it undertakes a share-based payment transaction.
·
PSAK 56 (Revised 2011), “Earnings per Share”, prescribed 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.
·
PSAK 60, “Financial Instruments: Disclosures”, 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.
·
PSAK 61, “Accounting for Government Grants and Disclosures of Government Assistance”, provides guidance on the accounting for, and in the disclosures of, government grants and in the disclosures of other forms of government assistance.
·
ISAK 15, “PSAK 24 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”, 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”.
·
ISAK 18, “Government Assistance - No Specific Relation to Operating Activities”, prescribes that government grants to entities meet the definition of government grants in PSAK 61, “Accounting for Government Grants and Disclosures of Government Assistance”, even if there are no conditions specifically relating to the operating activities of the entity other than the requirement to operate in certain regions or industry sectors.
·
ISAK 20, “Income Taxes - Changes in the Tax Status of an Entity or its Shareholders”,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.
The Group is presently evaluating and has not yet determined the effects of these revised and new standards and interpretations on the consolidated financial statements.
87
These interim consolidated financial statements are originally issued in Indonesian language.
PT INDOSAT Tbk AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2011 and for the Nine Months then Ended (Unaudited)
With Comparative Figures for 2010 and as of December 31, 2010
and January 1, 2010/December 31, 2009 (Audited)
(Expressed in millions of rupiah and thousands of U.S. dollar, except share and tariff data)
40.
RECLASSIFICATION OF ACCOUNTS
Following are the accounts in the December 31, 2010 and January 1, 2010/December 31, 2009 consolidated statements of financial position and in the September 30, 2010 consolidated statement of comprehensive income which have been reclassified to allow their comparison with the accounts in the September 30, 2011 consolidated financial statements:
As Previously Reported | As Reclassified | Amount | Reason | |||
December 31, 2010 | ||||||
Minority interest | Equity - non-controlling interests | 385,840 | Reclassification to conform with the presentation requirement of PSAK 4 (Revised 2009) | |||
January 1, 2010/ December 31, 2009 | ||||||
Minority interest | Equity - non-controlling interests | 330,593 | Reclassification to conform with the presentation requirement of PSAK 4 (Revised 2009) | |||
September 30, 2010 | ||||||
Operating revenues - fixed telecommunication | Operating revenues - cellular | 101,513 | Reclassification to conform with the 2011 presentation | |||
Other income (expenses) - others - net | Operating expenses - general and administration | 20,383 | Reclassification to conform with the 2011 presentation | |||
Minority interest in net income of subsidiaries | Profit for the period attributable to non-controlling interests | 49,449 | Reclassification to conform with the presentation requirement of PSAK 4 (Revised 2009) |
41.
COMPLETION OF THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The management of the Group is responsible for the preparation of the accompanying interim consolidated financial statements that were completed on October 25, 2011.
88
