PT Ciputra Development Tbk And Subsidiaries

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PT CIPUTRA DEVELOPMENT Tbk AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)For Nine Months Ended 30 September 2006 and 2005(In Rupiah)g. Inventories and Land for DevelopmentInventories of land, residential houses and shop houses under construction and completed residentialhouses and shop houses are stated at the lower of cost or net realizable value. The cost is determined usingthe average method. Expenditures relating to land development and improvement including interests andforeign exchange losses on loans obtained to finance the acquisition, development and improvement of theland incurred prior to the completion stage are capitalized as part of the cost of the land.The inventories of the hotel and restaurant (foods, beverages and others) are stated at the lower of cost ornet realizable value. The cost is determined using the first-in, first-out method (FIFO).Land owned by the Company and subsidiaries for future development is classified as “Land forDevelopment”. Upon the commencement of development and construction of infrastructure, the carryingcost of land will be transferred to the inventories or the appropriate property account.h. Property and EquipmentProperty and equipment, except landrights, are stated at cost less accumulated depreciation. Landrights arestated at cost and not amortized. Depreciation is computed using the straight-line method based on theestimated useful lives of the assets as follows:Buildings : 20 – 40 yearsGolf course : 20 yearsFurniture and fixtures : 5 yearsTransportation equipment : 5 yearsProject and golf equipment : 5 yearsThe cost of repairs and maintenance is charged to operations as incurred; significant renewals andbetterments are capitalized. When assets are retired or otherwise disposed of, their costs and the relatedaccumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in thestatements of income for the period.i. Construction in ProgressConstruction in progress is presented under property and equipment and stated at cost. The expenditures,including the borrowing cost, to finance the development and construction of the projects are capitalized aspart of the cost of the construction in progress. Upon substantial completion of the projects and when theassets are ready for their intended use, the accumulated costs will be transferred to the appropriate propertyaccounts.j. Deferred ChargesAdvertising expenses incurred before the opening of a project were deferred and are being amortized over 5years using the straight-line method.Billboard expenses are amortized over 1-3 years using the straight-line method.k. Reserve for Replacement of Hotel and Club House Operating EquipmentReserve for replacement of hotel and club house operating equipment is determined based on the estimatedreplacement value of the lost or damaged items. The replacement cost of the lost or damaged items isrecorded as a deduction to the reserve accounts.l. Impairment of Assets ValueThe Company and subsidiaries conduct an evaluation to determine whether there is an indication for eventsor changes in circumstance which indicate that its carrying amount may not be fully recovered at eachreporting date. If any such indication exists, the Company and subsidiaries are required to determine theestimated recoverable value of all theirs assets and recognize the impairment in assets value as a loss inthe consolidated statements of income.11
PT CIPUTRA DEVELOPMENT Tbk AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)For Nine Months Ended 30 September 2006 and 2005(In Rupiah)m. Revenues and Expense RecognitionThe Company and subsidiaries recognize revenues from real estate sales using the full accrual method. Therevenue from real estate sales will be recognized in full if all the following conditions are met:• Sale of residential houses, shop houses and other types of buildings, and sales of land wherein the houseor building will be built by the seller. The conditions that should be met consist of:a. The sale is consummated;b. The collectibility of the sales price is reasonably assured;c. The receivable from the sale is not subject to future subordination against other loans which will beobtained by the buyer; andd. The seller has transferred to the buyer the usual risks and rewards of ownership through atransaction representing a sale in substance and the seller does not have a substantial continuinginvolvement with the property.• Sale of land wherein the building will be built by the buyer without the involvement of the seller (retail landsales). The conditions that should be met consist of:a. The payments received from the buyer have reached 20% of the agreed selling price and this amountis non-refundable;b. The collectibility of the sales price is reasonably assured;c. The receivable from the sale is not subject to future subordination against other loans which will beobtained by the buyer;d. The process of land development has been completed that the seller is not obliged to develop the lotssold or to construct amenities or other facilities applicable to the lots sold as provided in theagreement between the seller and the buyer or regulated by law; ande. The sale consists only of the lots of land, without any involvement of the seller in the construction ofthe buildings on the lots sold.If a real estate sale fails to meet all of the above conditions, revenue recognition is deferred and sale isrecognized using the deposit method until all of the conditions are fulfilled.The cost of the land sold is determined on the basis of the acquisition cost of the land plus otherexpenditures relating to its development. The cost of residential houses sold includes all the constructioncosts incurred.Lease rentals by the shopping center tenants, except for anchor tenants, are paid 1 to 5 years in advances,and are recorded under “Unearned Revenues”. These lease rentals are being amortized and recorded asrevenues on a monthly basis. Lease rentals by anchor tenants are paid on a monthly basis and the relatedrevenues earned from these rentals are likewise recognized on a monthly basis.Lease rentals of golf villa units are recognized as revenues based on the respective rental periods of the golfvilla units.The membership registration fees for golf and club house are recognized as revenues upon receipt. Thequarterly or more membership dues for golf and club house received in advance are presented under“Unearned Revenues” account and amortized as revenues based on the periods benefited.Expenses are recognized when incurred (accrual basis).n. Borrowing CostInterests and foreign exchange losses incurred on loans obtained to finance the acquisition, improvementand development of the land are capitalized as part of the cost of the inventories of land and land fordevelopment for real estate, and capitalized as part of the cost of property and equipment and constructionin progress for shopping centers and hotels. Upon the substantial completion of all activities related to thedevelopment of the land or the construction of the facilities and the related property is ready for its intendeduse, the capitalization of interests and foreign exchange losses ceases.o. Troubled Debts RestructuringNet gain on debts restructuring net of related tax effect is recognized in the income statement for the periodas incurred and classified as an extraordinary item, net of all contingent liabilities which arise from therestructuring.12
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PT Ciputra Development Tbk And Subsidiaries

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