Consolidated Financial Statements and - Asia Pacific Fibers · resolution of the secured debt...

Consolidated Financial Statements and

Independent Auditors’ Report

PT Asia Pacific Fibers Tbk

And Its Subsidiaries

December 31, 2016 and 2015

CONTENTS

Board of Directors’ Statement

Independent Auditors’ Report

Page

Consolidated Financial Statements

Consolidated Statements of Financial Position 1

Consolidated Statements of Profit or Loss and Other Comprehensive Income 4

Consolidated Statements of Changes in Equity 5

Consolidated Statements of Cash Flows 6

Notes to the Consolidated Financial Statements 7 – 126

Additional Financial Information 1 – 6

Financial Statements – Parent Entity Only Appendix

Statements of Financial Position 1

Statements of Profit or Loss and Other Comprehensive Income 4

Statemenst of Changes in Equity 5

Statements of Cash Flows 6

INDEPENDENT AUDITORS’ REPORT

No.: 042/02/WA/III/17

The Shareholders, Board of Commissioners and Directors

PT ASIA PACIFIC FIBERS Tbk.

We have audited the accompanying consolidated financial statements of PT Asia Pacific Fibers Tbk

(the “Company”) and its subsidiaries, which comprise the consolidated statement of financial position as of

December 31, 2016, and the consolidated statements of profit or loss and other comprehensive income, changes

in equity and cash flows for the year then ended, and a summary of significant accounting policies and other

explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of such consolidated financial statements

in accordance with Indonesian Financial Accounting Standards, and for such internal control as management

determines is necessary to enable the preparation of consolidated financial statements that are free from

material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on such consolidated financial statements based on our audit. We

conducted our audit in accordance with Standards on Auditing established by the Indonesian Institute of

Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance about whether such consolidated financial statements are free

from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the

assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud

or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s

preparation and fair presentation of the consolidated financial statements in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness

of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies

used and the reasonableness of accounting estimates made by management, as well as evaluating the overall

presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

audit opinion.

Opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the

consolidated financial position of PT Asia Pacific Fibers Tbk and its subsidiaries as of December 31, 2016,

and their consolidated financial performance and cash flows for the year then ended, in accordance with

Indonesian Financial Accounting Standards.

Emphasis of matter

The accompanying consolidated financial statements have been prepared assuming the Company and its

Subsidiaries will continue as a going concern. As disclosed in Note 2 to the consolidated financial statements,

as of December 31, 2016, the Company and its Subsidiaries had capital deficiency of US$ 937,566,161, while

the current liabilities exceeded its total assets by US$ 877,548,446. Total current liabilities as of

December 31, 2016 of US$ 1,108,697,962 (85% of total current liabilities) represent the secured debts. In

October 2016, the Company has submitted a revised Secured Debt Restructuring Plan (SDRP) to Secured

Creditors, but until the issuance of this consolidated financial statements, the Company has not received the

response from its Secured Creditors. In addition to that, as of the date of this report, one of the Company’s

secured creditors is PT Perusahaan Pengelola Assets (PPA) (26%) has not yet given its approval on the

restructuring plan proposed by the Company. However, Damiano Investments BV., Netherland, majority

shareholder of the Company (57.85% ownership) and majority secured debt holder (92.5%) have provided

capital expenditure facility of US$ 23,570,000 and letter of credit facility of US$ 85,729,859 for raw materials

procurement.

Damiano Investmen BV., Netherland has commited to provide the necessary financial support to the Company

to enable it to continue as a going concern. The Company’s management also continues to exert effort and

expects to obtain the resolution of the secured debt restructuring in order for the Company to obtain working

capital from banks. The consolidated financial statements do not include any adjustments that might result

from the outcome of this uncertainty.

As disclosed in Note 51 to the accompanying consolidated financial statements, the Company’s management

reclassified certain accounts on the consolidated statements of financial position as of the earliest comparative

period January 1, 2015/December 31, 2014 to conform with the presentation of consolidated financial position

as of December 31, 2016. Our audit opinion is not modified in respect of this matter.

Other matter

Our audit of the accompanying consolidated financial statements of the Company and its Subsidiaries as of

December 31, 2016 and for the year then ended was performed for the purpose of forming an opinion on such

consolidated financial statements taken as a whole. The accompanying financial information of PT Asia Pacific

Fibers Tbk (parent entity only), which comprises the statement of financial position as of December 31, 2016,

and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the

year then ended (collectively referred to as the “Parent Entity Financial Information”), which is presented as a

supplementary information to the accompanying consolidated financial statements, is presented for the purpose

of additional analysis and is not a required part of the accompanying consolidated financial statements under

Indonesian Financial Accounting Standards. The Parent Entity Financial Information is the responsibility of

management and was derived from and relates directly to the underlying accounting and other records used to

prepare the accompanying consolidated financial statements. The Parent Entity Financial Information has been

subjected to the auditing procedures applied in the audit of the accompanying consolidated financial statements

in accordance with Standards on Auditing established by the Indonesian Institute of Certified Public

Accountants. In our opinion, the Parent Entity Financial Information is fairly stated, in all material respects, in

relation to the accompanying consolidated financial statements taken as a whole.

HENDRAWINATA EDDY SIDDHARTA& TANZIL

Welly Adrianto, CPA

No. Ijin Akuntan Publik. AP. 0060

Jakarta, March 17, 2017

PT ASIA PACIFIC FIBERS Tbk

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31, 2016, December 31, 2015 and January 1, 2015/December 31, 2014

1

Notes

December 31,

2 0 1 6

December 31,

2 0 1 5 *)

January 1,

2 0 1 5/

December 31,

2014*)

US$ US$ US$

ASSETS

CURRENT ASSETS

Cash and cash equivalents 3f,g,5 3,468,469 2,657,148 6,184,094

Trade receivables, net of allowance for

impairment of US$ 15,657,945 in 2016, 2015

and 2014

Third parties 3f,h,j,6 31,584,686 31,567,047 41,190,159

Related party 3f,h,j,6 – – –

Other receivables, net of allowance for


and 2014

Third parties 3f,h,j,7 3,032,953 2,787,973 3,426,117

Other current financial assets 3f,h,j,8 5,906,063 5,969,375 8,693,988

Inventories 3k,9 59,691,450 61,164,596 75,507,062

Purchase advances

Third parties 10 2,330,122 6,076,917 2,338,194

Related party – – 56,031

Prepaid taxes 3v,27a 10,178,297 11,419,541 15,902,785

Prepaid expenses 3l,11 1,828,659 2,128,943 2,520,486

Total Current Assets 118,020,699 123,771,540 155,818,916

NON–CURRENT ASSETS

Non-trade receivables, net of allowance

for impairment of US$ 111,962,653 in 2016,

2015, and 2014

Third party 3f,h,j,12 39,574,362 39,032,631 45,294,138

Related party – – –

Other non-current financial assets 3f,h,j,13 998,945 991,274 1,022,539

Property, plant and equipment, net of

accumulated depreciation of US$ 1,713,765,001

in 2016, US$ 1,709,106,418 in 2015, and

US$ 1,703,166,009 in 2014 3m,n,p,14 69,647,040 61,876,082 61,365,864

Intangible Assets 3o,p,15 107,316 113,590 119,866

Deferred tax assets 3v,27d 2,801,154 6,710,119 11,750,587

Total Non–Current Assets 113,128,817 108,723,696 119,552,994

TOTAL ASSETS 231,149,516 232,495,236 275,371,910

*) As reclassified

See Note 51

The accompanying notes to the consolidated financial statements

are an integral part of the consolidated financial statements


Vasudevan Ravi Shankar Bonar Firman Hasiholan Sirait

President Director Director



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued)


2

Notes

December 31,

2 0 1 6

December 31,

2 0 1 5 *)

January 1,

2 0 1 5/

December 31,

2014*)

US$ US$ US$

LIABILITIES AND EQUITY

(CAPITAL DEFICIENCY)

CURRENT LIABILITIES

Trade payables

Third parties 3r,16 11,986,713 12,241,858 25,584,407

Accrued expenses 3r,17 56,917,886 50,446,641 49,969,699

Taxes payable 3v,27b 145,695 149,767 159,621

Bank Loans 3r,18 85,729,859 88,135,716 88,250,457

Secured Debts 3r,19 947,993,134 945,081,879 957,675,525

Short – term employee benefits liabilities 3u,25 532,715 366,276 433,562

Current portion of long-term liabilities:

Credit financing payables 3q,r,22 41,718 41,379 56,131

Other short-term financial liabilities 3r,23 5,350,242 5,357,542 4,716,794

Total Current Liabilities 1,108,697,962 1,101,821,058 1,126,846,196

NON–CURRENT LIABILITIES

Borrowing from Other Financial Institutions:

Unsecured Debts and Notes Payable 3r,20 25,024,969 24,032,636 23,082,193

Working capital loans 3r,21 23,570,000 22,070,000 22,070,000

Credit financing payables 3q,r,22 67,977 5,940 47,253

Deferred revenues 3t,24 199,962 212,526 225,089

Long-term employee benefits liabilities 3u,26 11,154,807 9,759,801 12,125,149

Total Non–Current Liabilities 60,017,715 56,080,903 57,549,684

Total Liabilities 1,168,715,677 1,157,901,961 1,184,395,880

*) As reclassified

See Note 51








CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued)


3

Notes

December 31,

2 0 1 6

December 31,

2 0 1 5 *)

January 1,

2 0 1 5/

December 31,

2014*)

US$ US$ US$

LIABILITIES AND EQUITY

(CAPITAL DEFICIENCY)

EQUITY (DEFICIENCY)

Share Capital

Authorized 12,357,255,040 shares at Rp 10,000 par value per Series A, Rp 1,000 par value

per Series B and Rp 40 par value per Series C in 2016, 2015 and 2014

Issued and paid up 219,696,000 Series A and

2,276,057,347 Series C in 2016, 2015, and 2014 28 635,689,316 635,689,316 635,689,316

Additional paid-in capital 3w,29 624,323,168 624,323,168 624,323,168

Retained earnings (Accumulated deficit)

Appropriated 30 2,345,301 2,345,301 2,345,301

Unappropriated (2,199,923,946 ) (2,187,764,510 ) (2,171,381,755 )

Total Capital Deficiency (937,566,161 ) (925,406,725 ) (909,023,970 )

TOTAL LIABILITIES AND

EQUITY (CAPITAL DEFICIENCY)

231,149,516

232,495,236

275,371,910

*) As reclassified

See Note 51








CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME

For the years ended December 31, 2016 and 2015

4

Notes 2 0 1 6 2 0 1 5

US$ US$

REVENUES

Net sales 3x,34 355,748,940 387,053,770

Other operating revenues 3x,35 4,731,812 3,002,226

Total revenues 360,480,752 390,055,996

COST OF GOODS SOLD 3x,36 (342,580,203 ) (381,902,793 )

GROSS PROFIT 17,900,549 8,153,203

General and administrative expenses 3x,39 (15,386,149 ) (14,399,308 )

Finance costs 3x,40 (4,451,148 ) (7,863,850 )

Selling expenses 3x,38 (7,999,603 ) (10,786,487 )

Gain (loss) on foreign exchange transactions, net 3c (3,884,345 ) 11,236,898

Insurance claim settlement, net 3x,33 5,638,402 1,703,128

Gain on sale or disposal of property, plant and equipment 3x 28,669 −

Miscellaneous income, net 3x,41 1,174,884 309,069

(24,879,290 ) (19,800,550 )

LOSS BEFORE INCOME TAX (6,978,741 ) (11,647,347 )

TAX EXPENSE 3v

Current period 27c (883,641 ) (1,566,830 )

Deferred 27d (4,005,987 ) (4,572,495 )

Total tax expense 27e (4,889,628 ) (6,139,325 )

TOTAL LOSS FOR THE YEAR (11,868,369 ) (17,786,672 )

OTHER COMPREHENSIVE INCOME (LOSS),

NET AFTER TAX

Items that will not be reclassified to profit or loss:

Remeasurement of post employment benefit obligations (388,089 ) 1,871,890

Related income tax benefit (expense) 97,022 (467,973 )

Total Other Comprehensive Income (Loss), net of tax (291,067 ) 1,403,917

TOTAL COMPREHENSIVE LOSS FOR THE YEAR (12,159,436 ) (16,382,755 )



CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

AND OTHER COMPREHENSIVE INCOME (Continued)


5

Notes 2 0 1 6 2 0 1 5

US$ US$

Total Net Loss Attributable to the Owners

of the Company

(11,868,369

)

(17,786,672

)

Total Comprehensive Loss Attributable to the Owners

of the Company

(12,159,436

)

(16,382,755

)

EARNING (LOSS) PER SHARE: 3y

Basic 31 (0.004 ) (0.006 )

Diluted 31 (0.004 ) (0.006 )








CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


6

Retained Earnings

(Accumulated deficit)

Notes

Share Capital

Additional

paid-in capital

Appropriated

Unappropriated

Total Equity

(Capital

Deficiency)

US$ US$ US$ US$ US$

Balance as of December 31, 2014 635,689,316 624,323,168 2,345,301 (2,171,381,755 ) (909,023,970 )

Total loss for the year – – – (17,786,672 ) (17,786,672 )

Other comprehensive income, net after tax – – – 1,403,917 1,403,917



Other comprehensive loss, net after tax – – – (291,067 ) (291,067 )




CONSOLIDATED STATEMENTS OF CASH FLOWS


7

Notes 2 0 1 6 2 0 1 5

US$ US$

CASH FLOWS FROM OPERATING ACTIVITIES

Receipt from customers 359,942,630 401,800,894

Payment to suppliers (253,401,986 ) (288,202,470 )

Payment of salaries (8,830,852 ) (8,702,467 )

Other operating cash payments, net (88,909,037 ) (96,818,606 )

Cash provided by operations 8,800,755 8,077,351

Interest received 7,40 23,557 22,622

Interest expense and bank charges paid 17,40 (3,824,705 ) (7,221,113 )

Cash receipt from insurance claim settlement 7,33 5,688,253 1,703,128

Payment of income tax 27 (2,175,977 ) (4,475,260 )

Refund of income tax 27 5,426,618 4,747,807

Net Cash Provided By Operating Activities 13,938,501 2,854,535

CASH FLOWS FROM INVESTING ACTIVITIES

Payment to acquire property, plant and equipment 14,22 (12,431,261 ) (6,450,627 )

Proceed from sale of property, plant and equipment 14,41 28,669 –

Net Cash Used In Investing Activities (12,402,592 ) (6,450,627 )

CASH FLOWS FROM FINANCING ACTIVITIES

Receipt of working capital loans 21 1,500,000 –

Payment of bank loans 18 (2,405,857 ) (114,741 )

Payment of credit financing payables 22 (69,829 ) (56,065 )

Net Cash Used In Financing Activities (975,686 ) (170,806 )

NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS

560,223

(3,766,898

)

EFFECT OF FOREIGN EXCHANGE RATE 251,098 239,952

CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR

5

2,657,148

6,184,094


AT END OF YEAR

5

3,468,469

2,657,148



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


8

1. GENERAL

a. Establishment and General Information

PT Asia Pacific Fibers Tbk (“the Company”) is engaged in manufacturing of chemical and synthetic

fiber, weaving and knitting, and other activities related to the textile industry. The Company has 2

(two) manufacturing plants, and marketed its product in both domestically and internationally, such as

in Europe, United States of America, Asia, Australia and the Middle East.

PT Asia Pacific Fibers Tbk was established within the framework of Domestic Capital Investment

Law No. 6 of year 1968 as amended by Law No. 12 of year 1970 based on notarial deed No. 22 dated

February 15, 1984 of Januar Tirtaamidjaja, S.H., public notary in Jakarta. The above laws were

subsequently amended by the Limited Liability Company Law of Republic of Indonesia No. 40 in year

2007 dated August 16, 2007. The deed of establishment was approved by the Minister of Justice of

Republic of Indonesia based on decision letter No. C2–6107.HT.01.01.TH.84 dated October 26, 1984

and was published in Supplement No. 3247 of State Gazette No. 72 dated September 7, 1990.

The Article of Association has been amended based on notarial deed No. 92 dated March 24, 2009 of

Sutjipto, S.H., notary in Jakarta to adjust the Company’s Article of Association with Bapepam-LK No.

IX.J.1 dated May 14, 2008 concerning the Principles of Association of Public Offering of Conduct

Equity Securities and Public Companies. The deed of establishment was approved by the Minister of

Justice of Republic of Indonesia based on decision letter No. AHU-0052618.AH.01.09.Tahun 2009

dated August 14, 2009.

The Articles of Association have been amended based on notarial deed No. 50 dated September 10,

2009 of Sutjipto, S.H., public notary in Jakarta, concerning the change in the Company’s name from

PT Polysindo Eka Perkasa Tbk to PT Asia Pacific Fibers Tbk. The deed was approved by the Minister

of Law and Human Rights of the Republic Indonesia based on decision letter No.

AHU-54294.AH.01.02.Tahun 2009 dated November 10, 2009 and the publishment in Supplement No.

21449 of State Gazette No. 77 dated September 24, 2010.

The Company’s Articles of Association have been amended based on the notarial deed No. 107 dated

February 23, 2012 of Aryanti Artisari, S.H., M.Kn., public notary in Jakarta, concerning the

implemented the Management Employee Stock Option Programme (MESOP) based on the Capital

Market and Financial Institution Supervisory Agency (BAPEPAM-LK)’s Regulation No. IX.D.4. The

deed was approved by the Minister of Law and Human Rights of Republic Indonesia based on decision

letter No. AHU-0018443.AH.01.09.Tahun 2012 dated February 29, 2012.

The Articles of Association have been amended several times. The latest amendment of the Company’s

Articles of Association was based on the notarial deed No. 30 dated July 7, 2015 of Aryanti Artisari,

S.H., M.Kn., notary in Jakarta to adjust the Company’s Article of Association with the regulation from

Otoritas Jasa Keuangan. The deed of establishment was approved by the Minister of Justice of

Republic of Indonesia based on decision letter No. AHU-AH.01.03-0954603.Tahun 2015 dated

July 31, 2015.

On February 4, 2011, the Company obtained the approval from Chairman of the Capital Investment

Coordinating Board (BKPM) in his letter No. 2/B/II/PMDN/2011 with regard to the cancellation of

approval from Chairman of the Capital Investment Coordinating Board (BKPM) in his letter

No. 249/II/PMDN.1997 dated December 2, 1997.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


9

1. GENERAL (Continued)

a. Establishment and General Information (Continued)

Further, the Company has received the approval of Chairman of the Capital Investment Coordinating

Board (BKPM) for the expansion of the Fibre capacity in Karawang side through the approval letter

No. 2/B/II/PMDN/2011 dated February 24, 2011. This project has started in the second quarter of

2012.

In accordance with Article 3 of Company’s Article of Association, the Company’s objectives and

scope of activities is mainly to engage in the manufacturing of chemical and synthetic fiber, weaving

and knitting, and other activities related to the textile industry. The Company is domiciled in Kendal,

Central Java with its plants located in Kendal, Central Java and Karawang, West Java. The Company’s

representative office is located at The East Building, 35th Floor, Jl. DR. Ide Anak Agung Gde Agung

(formerly Jalan Lingkar Mega Kuningan) Kav. E-3.2 No. 1, Jakarta. The Company started its

commercial operations in 1986.

The Company has many ongoing social activities in the local environs of its two plant location in

Semarang and Karawang which the purpose of this activity is to improve the livelihood of the

surrounding communities. In order to carry out these programmes more effectively, the Company has

established a foundation “Yayasan Asia Pacific Fibre” on January 15, 2010. The deed was approved

by the Minister of Justice and Human Rights of Republic of Indonesia based on decision letter

No. AHU-960.AH.01.04.Tahun 2010 dated March 15, 2010.

The Company’s immediate parent company is Damiano Investments BV., incorporated in Netherland,

and its ultimate parent company is ADM Capital and Spinnaker Capital Group, incorporated and

domiciled in Hong Kong and United Kingdom, respectively.

b. Public Offering of Shares, Notes Payable of the Company and its Subsidiaries

On December 14, 1990, the Company offered 12,000,000 shares to the public through Jakarta and

Surabaya Stock Exchanges, now known as Indonesian Stock Exchange.

On October 8, 1993, the Company obtained the notice of effectively from the Chairman of Capital

Market Supervisory Agency (BAPEPAM), in his letter No. S-1738/PM/1993, for its limited

offering of 184,000,000 shares through rights issue with preemptive rights to stockholders. These

shares were listed in Jakarta and Surabaya Stock Exchanges on November 1, 1993.

On December 15, 1994, the Company obtained the notice of effectively from the Chairman of

BAPEPAM, in his decision letter No. S-2027/PM/1994, for the change of par value from Rp 1,000

to Rp 500 per share.

On May 20, 1996, the Company obtained the notice of effectively from the Chairman of

BAPEPAM, in his decision letter No. S-778/PM/1996, for its offering of 1,104,000,000 shares

through rights issue II with preemptive rights to stockholders. These shares were listed in Jakarta

and Surabaya Stock Exchanges on June 10, 1996.





10


b. Public Offering of Shares, Notes Payable of the Company and its Subsidiaries (Continued)

On December 11, 1997, the Company obtained the notice of effectively from the Chairman of

BAPEPAM, in his decision letter No. S-2844/PM/1997, for its offering of 2,185,920,000 shares

through rights issue III with preemptive rights to stockholders. These shares were listed in Jakarta

and Surabaya Stock Exchanges on January 5, 1998.

In 1994, the Company issued US$ 125,000,000 Unsecured Senior Notes which are listed in

Luxembourg. In 1996, the Company offered to the holders of said unsecured notes to exchange

their notes with US$ 125,000,000 Guaranteed Senior Notes issued by PIFC with the Company as

the guarantor. These notes were listed in Luxembourg Stock Exchange.

In 1996, PIFC, with the Company as a guarantor, also issued US$ 50,000,000 Secured Floating

Rate Notes and US$ 260,000,000 Guaranteed Secured Notes which were listed in Luxembourg

Stock Exchange.

In 1997, PIFC, with the Company as a guarantor, issued US$ 250,000,000 Guaranteed Secured

Notes which were listed in Luxembourg Stock Exchange.

Since January 2000, the above notes issued by PIFC were delisted from Luxembourg Stock

Exchange.

Beginning of December 2004, all of the Company’s outstanding shares totaling 4,393,920,000

shares were suspended regarding the bankruptcy proceeding against the Company and delay in

submitting the required consolidated financial statements. The Company’s shares were still

suspended after the Company removes their bankruptcy. However, the Company took efforts to

remove its suspension which includes submitting Company’s future plan of actions. Further in

July 2006, all of the Company’s shares resumed trading.

In 2006, the Company converted the unsecured debt amounted to 43,144,238,750 shares as part

of the implementation of Composition Plan which have been approved and ratified by the

Commercial Court. Based on the condition issued by Indonesian Stock Exchange, the new shares

cannot be traded for 1 (one) year. Further in October 2007, the new Company’s shares were traded.

Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on February 21, 2008,

the stockholders approved the reverse stock split (split down) with a ratio of 20:1 wherein 20 old

shares will become 1 new share. Reverse stock splits are conducted for the Company’s shares to

be more liquid and in line with the Company’s performance. Due to the changes in the Company’s

number of shares and par value, the Company amended its Articles of Association and the notarial

deed regarding the changes of the Company’s Article of Association had been approved by the

Minister of Justice and Human Rights on March 3, 2008. Further, based on the notarial deed of

Sutjipto, S.H., No. 122 dated February 27, 2008 regarding shares purchase as the result of reverse

stock split named PT Trimegah Securities Tbk as “Stand by Buyer”. In addition, all shares from

reverse stock were traded on March 14, 2008.





11


b. Public Offering of Shares, Notes Payable of the Company and its Subsidiaries (Continued)

On October 10, 2008, the Subsidiary’s shares (PT Texmaco Jaya Tbk) have been delisted from the

Indonesian Stock Exchange based on its letter No. S-04741/BEI.PSR/09/2008 and

Peng-004/BEI.PSR/DEL/09-2008 due to the suspension of trading shares and going concern

problem of the Subsidiary.

Since December 2, 2009, the Company’s shares in Indonesian Stock Exchange have been changed

with the new Company’s name.

Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on March 24, 2009

and based on notarial deed No. 91 dated March 24, 2009 of Sutjipto, S.H., public notary in Jakarta,

the stockholders approved the issuance of 118,845,397 new authorized shares series C (5% of

issued and paid-up capital) without preemptive rights, for providing stock options to the

Company’s management and employees (Management Employee Stock Option Programme /

MESOP). The notarial deed was approved by the Minister of Justice of Republic of Indonesia

based on his decision letter No. AHU-0052619.AH.01.09.Tahun 2009 dated August 14, 2009. As

per the Company’s schedule that was reported to Indonesian Stock Exchange dated

March 17, 2009, its programme has been implemented at the latest period (February 1, 2012).

Further, based on the notarial deed No. 107 dated February 23, 2012 of

Aryanti Artisari, S.H., M.Kn., public notary in Jakarta, the Management Employee Stock Option

Programme / MESOP has been implemented with the execution price of Rp 45 each. All shares

under MESOP have been fully paid up through the Company’s bank accounts dated February 20

and February 21, 2012. It has been registered in the Indonesian Stock Exchange through

announcement No. Peng-P-00032/BEI.PPR/03-2012 dated March 5, 2012 and No. Peng-P-

00033/BEI.PPR/03-2012 dated March 7, 2012.

Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on June 18, 2012 and

based on the notarial deed No. 88 dated June 18, 2012 of Aryanti Artisari, S.H., M.Kn., public

notary in Jakarta, the stockholders approved the issuance of 74,872,600 new authorized shares

series C (3% of issued and paid-up capital) without preemptive rights, for providing stock options

to the Company’s management and employees (Management Employee Stock Option Programme

/ MESOP). The Company has sent a letter No. 068/APF-CS/VI/2014 dated June 25, 2014 and

No. 071/APF-CS/VII/2014 dated July 7, 2014 to Otoritas Jasa Keuangan (OJK) regarding the

cancelation of MESOP implementation due to the debt restructuring is not completed so the

Company’s market price is decreasing. Based on the Extraordinary General Stockholders Meeting

(RUPSLB) held on June 16, 2015 notarial deed No. 49 dated June 16, 2015 of Aryanti Artisari

S.H., M.Kn, the stockholders approved the cancelation of MESOP implementation.





12


c. Subsidiaries

The Company has the following non-active subsidiaries are as follows:

Commercial Percentage of Total Assets

Subsidiaries Domicile Nature of Business Operations Ownership 2 0 1 6 2 0 1 5

% US$ US$

(in million) (in million)

PT Texmaco

Jaya Tbk (TJ)

Karawang Trading, weaving,

knitting and processing

1972 92.00 *) *)

PT Texmaco Graha Jakarta Trading of textile and 1994 91.08 *) *)

Busana (TGB) producing ready to

(99% owned by TJ) wear garments and

accessories

Polysindo International

Finance Company

BV (PIFC)

Netherlands Financial services 1994 100.00 759 759

Polysindo (Mauritius)

Ltd. (PML)

Republic of

Mauritius

Financial services Pre-

operating

100.00 – –

*) Not applicable due to PT Texmaco Jaya Tbk (TJ) and PT Texmaco Graha Busana (TGB) have been deconsolidated.

In 2001, the Company acquired 10,000 shares which represent 100% ownership in Polysindo

(Mauritius) Ltd. The shares were acquired for the amount of US$ 10,000. The difference between

the acquisition cost and the net assets of PML amounted to Rp 221,924,188 (equivalent to

US$ 21,339) was recorded as “difference on restructuring among companies under common

control” account as part of the additional paid-in capital in the consolidated statements of financial

position (Note 29).

There were no transactions between the Company and Polysindo (Maurutius) Ltd and Polysindo

International Finance Company BV during 2015 and 2014. The Company intends to close the

operation of its subsidiaries along with the restructuring of the Company.

Since April 2008, PT Texmaco Jaya Tbk (TJ) operations (Fleece division) are conducted by the

Company with tolling basis.

Since the second semester of 2004, PT Texmaco Graha Busana has halted its business operations.





13


d. Boards of Commissioners and Directors, Audit Committee and Employees (Continued)

The composition of board of commissioners, directors and audit committee (key management) of

the Company as of December 31, 2016 is based on the notarial deed No. 13 dated August 9, 2016

of Aryanti Artisari, S.H., M.Kn., notary in Jakarta.

The composition of the Company’s board of commissioners and directors as of December 31,

2016 and 2015 are as follows:

2 0 1 6 2 0 1 5

Board of Commissioners:

President Commissioner : Mr Robert Clive Appleby Mr. Robert Clive Appleby

Independent Commissioners : Mr. Ir. Agus Tjahajana

Wirakusumah

Mr. Ir. Agus Tjahajana

Wirakusumah

Mr. Dono Iskandar Djojosubroto Mr. Dono Iskandar Djojosubroto

Commissioners : Mr. Christoper Ian Teague Mrs. Cheong Kamun

Mr. Christopher Robert Botsford Mr. Christopher Robert Botsford

Mr. Robert Mc Carthy Mr. Robert Mc Carthy

Board of Directors:

President Director : Mr. Vasudevan Ravi Shankar Mr. Vasudevan Ravi Shankar

Independent Directors : Mr. Bonar Firman Hasiholan

Sirait

Mr. Bonar Firman Hasiholan

Sirait

Mr. Antonius Widyatma Sumarlin Mr. Antonius Widyatma Sumarlin

Directors : Mr. Seeniappa Jegatheesan Mr. Seeniappa Jegatheesan

Mr. Peter Vinzenz Merkle Mr. Peter Vinzenz Merkle

To comply with BAPEPAM regulation No. IX.1.5 regarding the forming and work guidance of

Audit Committee, the Board of Commissioners has formed Audit Committee.

The members of the Company’s Audit Committee as of December 31, 2016 and 2015 are as

follows:

Chairman : Mr. Dono Iskandar Djojosubroto

Member : Mr. Doedy Darwin

Mr. Deddy Sutrisno

The Company’s corporate secretary as of December 31, 2016 and 2015 is Mr Tunaryo.

In February 2009, the Company formed an internal audit department to comply with

BAPEPAM-LK regulation. The head of internal audit is Mr. Yohanes Baptis Galuh Adjar

Pamungkas.





14


d. Boards of Commissioners and Directors, Audit Committee and Employees (Continued)

As at December 31, 2016, the Company had 3,338 permanent employees (2015: 3,062 permanent

employees). And as at December 31, 2016 and 2015, the Subsidiaries do not have permanent

employees.

e. Approval and Authorization for Issuance of Consolidated Financial Statements

The consolidated financial statements of the Company as of December 31, 2016 and for the year then

ended was approved and authorized for issuance by the Board of Directors on March 17, 2017.

2. GOING CONCERN, DEBT RESTRUCTURING AND ECONOMIC CONDITIONS

a. Going Concern

The global polyester chain witnessed a modest recovery in 2016 after hitting a bottom of its growth

cycle in 2014/15 caused by a combination of excess capacity, weaker demand growth in the key

markets, especially in China. PTA margins did not show any significant recovery during 2016 as

expected and continued to remain weak within a narrow band. In most part of the year it remained

below cash cost levels forcing older capacities to shut down. However, cotton prices have trended

upwards in the second half of the year and remained steady supported by stable supply demand gap

during the season.

Overall growth of polyester fiber continues to remain subdued at 3.70% in 2016 with the operating

rates remain at 69.6% during the year. Average polymer utilization rates have also maintained low at

just 76.1%. PTA world capacity reached 77.8 mil tonnes, almost unchanged from 2015. Hence, the

operating rates for 2016 increased to 76.5% as compared to 74% for the previous year. The continuous

mismatch in supply and demand of PTA and excessive capacities impacted PTA margins adversely.

PTA margins were under constant pressure and did not recover as expected; the average margin levels

remained at US$67/MT (spot).

The weaker consumption being shaped to some extent by the current economic scenario, slowdown in

China, key textile market and uncertainties due to commodity price crash affected the global textile

trade, dampening the demand outlook. Moreover, huge capacity additions in PTA in the past, Polyester

Fiber and Filament led to lower worldwide operating rates, impacting the performance of the polyester

industry globally. Domestic market also remained depressed due to sluggish demand and stiff price

competition through increased imports of polyester fiber and yarn from China, Malaysia and India.

Despite the market conditions, the Company continue to operate its plant at optimum capacity

supported by its strong customer base and the sustained demand from domestic market. Damiano

Investments BV., Netherland, our majority shareholders continue to provide the working capital

facility of Letter of Credit limit through Deutsche Bank, Hong Kong. Damiano also provided

additional Capex loan of US$ 1.50 million to meet certain critical capex investments.





15

2. GOING CONCERN, DEBT RESTRUCTURING AND ECONOMIC CONDITIONS (Continued)

a. Going Concern (Continued)

The sharp drops in crude prices experienced in 2015 and its volatility (ranging between US$ 36 ~

60/barrel- Average at US$ 49/Barrel) led to significant fall in commodity prices and the feed stock

prices PX and PTA consequently pushing down the polyester chain prices. The instability in crude

prices continued during most part of the year ranging between US$ 28 ~ 52 per barrel

(Average-US$ 42/barrel), which stabilized around US$ 54 levels by the first quarter of 2017. The

prices of PX and PTA also remained volatile and moved in tandem with the crude price movement.

The spot prices of both PX and PTA for 2016 have dropped and the average prices were lower by

6.4% and 5% respectively, which in turn have pushed down the Polyester chain prices and margins

continue to remain squeezed. As a result, the sales revenue for the year 2016 has dropped significantly

to US$ 356 million as compared to US$ 387 million for the previous year. Domestic market remained

sluggish throughout the year with downstream activities slowed down on account of fall in retail

consumption and stiff price competition due to cheap imports of Polyester Fiber and Yarn. Filament

yarn prices and margins were severely affected, in particular, due to excessive supply and lack of

demand from downstream weaving and knitting sector. Hence the production of yarn was curtailed in

view of lack of demand for certain type of products. Overall drop in yarn production is 3.25% over

2015, while Fiber and Polymer production were marginally higher. The drop in the sales of 7.5% over

the previous year is primarily attributed to fall in selling price and marginally by volume. However,

Sales of Performance Fabrics division of the Company has marginally increased to US$ 8.59 million

in 2016 as compared to US$ 7.74 million for the previous year.

Nevertheless, the overall financial performance of the Company in terms of earnings before interest

and depreciation (EBITDA) improved. The Company posted a positive EBITDA of US$ 3.337 million

in 2016 as compared to a negative EBITDA of US$ 6.605 million for the previous year. The

improvement in the performance was mainly on account of outsourcing of PTA from market. The

operational losses of PTA plant due to very low margins were fully eliminated by the Company’s

strategic decision to shut down and mothball the plant till it is revamped to improve the cost efficiency

at par with the newer plants.

However, the lower earnings (EBITDA) continued to cause severe strain on the cash flow position of

the Company leading to postponement of certain maintenance projects and financial commitments.

Due to the tight cash flow situation, Company could not service the interest to its unsecured creditors

(New Notes) fully during the year. Interest amounts due for all the four quarters to unsecured creditors

were capitalized as per the approval from the majority of the creditors. Damiano Investments BV.,

Netherlands, the majority shareholders and creditors of the Company, waived the interest on LC loan

for ther year 2016 and also came forward to extend additional LC limits as an interim arrangement to

augment the working capital requirements in the light of the increasing RM prices.





16



The analysis of polyester industry trend confirmed that the bottom of the polyester cycle is over in

2014/15 and the emerging investment profile indicates that the polyester markets are on a more reliable

path of recovery globally. Global fiber industry will be determined increasingly by growth in demand

in Textiles and Apparel in Asia. Although economic growth in developed regions such as in North

America, Europe and Japan remains modest, they continue to be major consumers of downstream

textiles and apparel products sourced from Asia. Most importantly, polyester is widely accepted within

China and elsewhere in Asia by major retailers and apparel brand owners as the key performance fiber

for the higher added value technical textile sectors.

Therefore, significant growth is forecast in the many performance fabrics that are increasingly

developed in Asia for consumption in home textiles, building construction, advanced sportswear

apparel, and the fast emerging medical and hygiene textile sectors via the non-woven route.

The Company with its newly built capabilities to increase the volume of specialty products (Colored

yarns/PBT) for automotive/ home textiles applications and its strategy to enter new markets for

performance oriented textile and non-textile segments, will be able to face the competition and

improve its performance in the years to come.

Earlier, the Company’s 100% of energy requirements (both power and steam) had been met by PT

Wismakarya Prasetya (WKP), earlier. However, subsequent to bankruptcy of WKP, the Company took

the following action to ensure uninterrupted supply of power steam and Gas:

1) Acquired the ABB Gas turbine – 20 MW from WKP through Court auction with effect from

November 5, 2014.

2) Entered into a rental agreement for the rest of the facilities of WKP with the curator of PT

WKP to maintain and operate the turbines to generate power and steam for its captive use –

vide agreement dated April 16, 2014 and the subsequent amendments i) dated November 24,

2014 and ii) December 18, 2015, which are valid up to December 31, 2018.

3) Consequent to expiry of the contract for supply of Gas between PT WKP and PGN, the

Company has renewed the Gas supply contract directly with PT PGN to ensure uninterrupted

supply of Gas for operating the power plant – vide contract no 011700.PK/HK.02/USH/2014

dated June 20, 2014, which is valid through March 2018.

In 2016, the production volumes and the Capacity utilization of APF facilities in Karawang increased

marginally, while the production volume in Semarang dropped due to curtailment of production owing

to market conditions. PTA plant at Karawang was shut down temporarily from November 2015 in

view of the trading conditions as explained above and its PTA requirement is outsourced externally.

The overall capacity utilization was, however, maintained around 90% in both the facilities.

In addition, the Company’s financial condition in 2016 showed the following:

Total comprehensive loss for the year amounting to US$ 12,159,436

Negative working capital amounting to US$ 990,677,263

Capital deficiency amounting to US$ 937,566,161





17



Subsidiary’s Operations (PT Texmaco Jaya Tbk):

Consequent to declaration of bankruptcy of PT Texmaco Jaya by the commercial court of Jakarta on

August 19, 2011 as per the court order 10/PKPU/2010/PN.NIAGA.JKT.PST Jo No:

71/PAILIT/2010/PN.NIAGA.JKT.PST, the management of the company and enforcement of the

liquidation process was under the team of curators appointed by the Court and monitored by the

supervisory judge. The Curator and the Commercial Court of Jakarta had acknowledged and registered

the receivable amount of Rp 1,106,832,761,717 as unsecured debt. The liquidation process of the

Company’s subsidiary is still under progress.

In the meantime, the Court has approved continued operation of its Fleece division as a going concern

with a view to maintain the value of the bankrupt assets. In accordance with the Court approval and

pursuant to the tolling agreement between the team of curators and PT Asia Pacific Fibers Tbk, the

Fleece division continued to be operated on tolling basis.

Pursuant to PSAK 10 (Revised 2010), the Company and its Subsidiaries has determined US dollar as

its functional currency as predominant financial transaction such as Sales, Purchases, Pricing etc., are

transacted in dollar currency. Hence the Company and its Subsidiaries has chosen to prepare and

present its financial statements in US Dollar currency effective January 2012. The financial statements

for the year 2016 and 2015 was prepared in accordance with the guidelines provided under PSAK 10

paragraph 27-34 and paragraph 61-62.

The accompanying financial statements have been prepared on a going concern basis, and do not

include any adjustment that might result from the outcome of these uncertainties. Related effects will

be reported in the financial statements as they become known and can be estimated. To date, the

Company, in running its operations is supported through the letter of credit facility and other working

capital loans from Damiano Investments BV., Netherland and through the confidence and support of

its suppliers and customers. In addition, Damiano Investments BV., Netherlands confirmed that it will

provide the assistance to the Company in obtaining letter of credit facilities until such time that the

Company can secure a credit facility from banks on its own. Damiano Investments BV., Netherland

has also provided the requisite funds for the Company’s maintenance capital expenses programs in

2016 through its Third Loan Agreement.

b. Debt Restructuring

Secured Debt

In response to our continuous appeal and discussions with Ministry of Finance (MoF)/PT Perusahaan

Pengelola Asset (PPA) for a restructuring solution of Secured Debt, Ministry of Finance had appointed

a high-level committee lead by Mandiri Sekuritas (Investment and Security division of the state-owned

Bank – Bank Mandiri) to study and recommend a restructuring proposal for the Texmaco group debts

including PT Asia Pacific Fibers secured debt to the Ministry for its review and approval.





18


b. Debt Restructuring (Continued)

Secured Debt (Continued)

Accordingly, the Committee had several rounds of discussion with the Management and Majority

shareholders of the Company on various restructuring under the given conditions. The committee had

undertaken financial and legal due diligence of the Company and also done technical evaluation and

valuation of the Company’s assets with a view to formulate a suitable restructuring proposal. During

the bilateral discussions with the committee, APF had emphasized the need for an immediate solution

to the issue and requested that APF to be de-linked from Texmaco group in as much as it is no more

an affiliate company and the Majority shares are held by Damiano BV, who are the majority creditors

of the Company as well.

After a several rounds of discussions and considering the current conditions and various other

economic factors, the Company had submitted an updated Secured Debt Restructuring proposal to the

Committee and the MoF during October 2016. The final restructuring plan proposed by the Company

envisages conversion of the entire secured debt into equity through debt equity swap. The broad terms

of the Secured Debt Restructuring Proposal (SDRP) are as follows:

a) 100% of the Secured Debt of MoF/BPP will be either converted into 15 - Year, 0% Coupon

Mandatory Convertible Bonds (MCB) for a value equivalent to 100% of the Principal value of the

debt (as per the terms set out below), or

b) Directly convert the entire debt in to 24.49% of the expanded equity of the Company (Post

Restructure)

c) 100% of all other Secured Debts comprising of Secured Bonds, Ex – Banks bilateral loans will be

converted into equity as below:

i. All Secured Bonds to be converted into 69.26% of the equity

ii. Other Secured Debts to be converted into 3.08% of the equity

d) All accrued interest/ penalties on the Secured Debt up to the date of restructure will be fully

waived.

Terms of the MCB

a) Face value of the MCB will be equal to the 100% value of the MoF/BPP debt.

b) The tenor of the MCB is 15 years with 0% Coupon rate.

c) The restructured MCB of BPP and MoF will be denominated in Rupiah (IDR). The

debts denominated in currencies other than IDR will be converted into Rupiah (IDR)

using the exchange rate (BI Middle rate) prevailing at the date of restructure.

d) At holder’s option, MCBs can be converted in to Equity any time after expiry of 36/60

months from the date of issue of the MCB;

e) MCB is classified as a quasi-equity instrument.





19




In March 6, 2017, PT Asia Pacific Fibers Tbk established a wholly owned subsidiary Asia Pacific

Fibers Hong Kong Limited, a private limited company established under the laws of the Hong Kong

Special Administrative Region (“HKSAR”) with corporate registration number 2493881 and its

registered office in Hong Kong.

The new subsidiary Company, Asia Pacific Fibers Hong Kong Limited through the execution of Deed

Poll will voluntarily assume liability of the Issuer and/or Guarantor in respect of the secured bonds of

US$ 682.5 million. This is intended to facilitate the restructuring of (inter alia) the Notes through a

scheme of arrangement pursuant to sections 673 and 674 of the Companies Ordinance (Cap 622 of the

law of the HKSAR) (“Scheme”) and otherwise in a manner that is beneficial to the Company, the

Company and each of their respective stakeholders, including (but not limited to) the holders of the

Notes.

The Company has recently made considerable progress towards resolving these issues with the

Government of Indonesia and now seeks to push ahead with a restructuring of the Notes, which will

help facilitate acceptance and implementation of any restructuring plan agreed with the Government

of Indonesia. The last 15 years of protracted inability to achieve a restructuring of its secured debt,

have eroded the Company’s ability to service the original level of its secured debt. However, there

remains significant value in the Company’s business which can be made available to creditors under

any restructuring. Such a restructuring will also pave the way for the Company to achieve a sustainable

capital structure which will allow it to continue and grow its business with new capital expenditure

and other initiatives which will benefit all of its stakeholders (which include public shareholders

currently holding over 40% of the Company’s equity).

The Company’s ability to restructure the Notes is constrained by the fact that the restructuring would

require unanimous consent from holders of the Secured Bond Holders. However the Company has

been unable to identify a small percentage (of around 1-2%) of such holders which it believes may be

inactive, either being liquidated or no longer exist or in the case of individuals being deceased.

As is clear from the above, the Company is committed to implementing a restructuring which is fair

to all holders of the Notes, but has been frustrated by the inability to identify or contact a very small

minority of holders of the Notes to obtain the required approvals for such a restructuring. Accordingly,

the Company has obtained professional advice as to the various options available to it to effect a

restructuring in a manner that is fair to all stakeholders, but also allows it to bind unidentified holders

of the Notes who do not provide affirmative consent. The Company has considered that a Scheme in

HKSAR would be the most appropriate options for implementing a restructuring the secured bonds.





20




The advantages of this scheme of restructuring are:

(a) Management of the Company will remain free to run the business and operations of the Company

while any scheme is being proposed and implemented;

(b) The Company has been advised that a scheme may be used to bind unidentified holders of the

Notes who do not provide affirmative consent so long as the Scheme is supported by the requisite

majorities of holders of the Notes and sanctioned by the relevant court after a hearing on fairness;

(c) The key creditors of the Company are managed by fund managers who have offices in Hong Kong

and are subject to supervision of, or registration with, the Hong Kong Security and Futures

Commission; and bind dissenting secured creditors of the Company (including minority holders of

the Notes).

The committee has subsequently submitted its interim report and recommendations to the Ministry of

Finance for its decision and final direction. While the majority creditors are in agreement with the

above proposal. It is expected that a final decision by MoF/PPA on restructuring will be taken very

soon.

Unsecured Debt

The Company has executed the restructuring agreement with the unsecured creditors as approved by

the creditors and ratified by the Court. Accordingly, the total unsecured loans after the restructuring

stands at US$ 18,670,630 plus unpaid capitalized interest until November 2016 of US$ 6,354,338.56

or amounted to US$ 25,024,968.56.

The Company has taken all the required corporate actions towards the implementation of the

Composition Plan (“Peace Plan”) as approved by the unsecured creditors of the Company and ratified

by the Commercial Court. The steps involve the issuance of the new debts secured or unsecured in

exchange of the old unsecured debts and issuance of shares for the reduction of the principal amount

of debts as per the terms of the Composition Plan. The Company has reduced its unsecured debts as

per the Composition Plan and increased its share capital as additional capital pending allotment to the

creditors. The Company has appointed The Hongkong and Shanghai Banking Corporation Limited,

Hong Kong to act as its Fiscal Agent, Paying Agent and Trustees for its new unsecured notes which

are euro-cleared.





21



Unsecured Debt (Continued)

In January 2015, the Company sought and got the approval of its Unsecured New Note Holders for

the extension of its maturity from February 2015 to February 2018. The details are as below:

Redemption Date

Redemption Table (Revised for PIK)

Subject to PIK Outstanding Redemption Redemption

% Request Amount Amount

February 15, 2005 US$ 18,670,630.00 US$ 18,670,630.00 0.00%

to November 15, 2016 US$ 6,354,338.56 US$ 25,024,968.56 0.00%

February 15, 2018 US$ 23,773,720.13 US$ (1,251,248.43) 5.00%

February 15, 2019 US$ 19,394,350.63 US$ (4,379,369.50) 17.50%

February 15, 2020 US$ 15,014,981.13 US$ (4,379,369.50) 17.50%

February 15, 2021 US$ 10,635,611.64 US$ (4,379,369.50) 17.50%

February 15, 2022 US$ 5,630,617.93 US$ (5,004,993.71) 20.00%

February 15, 2023 US$ 0.00 US$ (5,630,617.93) 22.50%

US$ 25,024,968.56 US$ (25,024,968.56) 100.00%

c. Economic Condition

Indonesia’s economic growth in 2016 recorded 5.02% better than that in 2015 at 4.88% in 2015, but

marginally lower than the prediction by Bank Indonesia at 5.2%. Economic growth in 2016 was

primarily supported by domestic consumption growth and investment performance improvement.

Domestic consumption grew relatively strong, supported by controlled inflation. Indonesia’s economy

has weathered recent global financial volatility and is well placed to mitigate future risks to its growth

outlook bolstered by solid economic fundamentals and policy reforms.

Exports declined marginally in monetary terms US$ 144.43 billion in 2016, as compared to the

previous year realization of US$ 150.37 billion in 2015 recording a dip of 3.95%, thought in terms of

volume it recorded an increase of 0.66% y-o-y. Hence, the dip in exports were primarily triggered by

low prices for key export commodities such as coal, metal minerals, rubber and crude palm oil. Import

trade value also dropped by 4.94% to US$ 136.65 billion as compared US$ 142.69 billion. Drop in

import of Capital goods, raw materials and intermediary inputs indicates slowdown in domestic

manufacturing activities. On the other hand, there is significant increase in consumer goods imports

clearly indicating growth in consumption.

The fall in crude prices continued thru’ 1st quarter of 2016 and hit a low of US$ 28/ per barrel in

February 2016, but gradually recovered and stabilized around US$ 50/Barrel by end of the year. Crude

prices continue to recover and remained stable in Q1 2017 around US$ 54/Barrel, indicating some

stability and recovery in commodity segment.





22


c. Economic Condition (Continued)

The inflation in 2016 was quite moderate at 3.02% well below the BI targeted rate of 4±1% (yoy) and

as compared to 3.38% for the previous year. The drop in the oil prices and the prices of key

commodities are the primary reason for the drop in the inflation.

Indonesia trade balance continue to be in surplus for second year in row at US$ 8.78 billion in 2016

as compared to US$ 7.67 for the previous year. The current account deficit fell from US$ 17.5 billion

(2.0% of GDP) in 2015 to US$ 16.3 billion (1.8% of GDP) in 2016 supported by improvement in

goods and services trade performances.

Indonesian currency remained resilient through the year and relatively stable backed by solid economic

growth and better economic outlook going forward. Bank Indonesia's benchmark rupiah rate (Jakarta

Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.27 percent at IDR 13,436 per US

dollar by end of December 2016. In full-year 2016 the currency of Indonesia appreciated 2.60 percent

against the US dollar. BI has lowered its key interest rate (BI Rate) four times during the period from

January 1, 2016 till July 21, 2016 by 100 basis point (from 7.50% to 6.50%) in consistent with the

macro-economic stability of the Country.

The ambitious tax amnesty launched by the Government of Indonesia during the year entered its third

phase in Q1- 2017 and the resultant tax revenues positively contributed to lower the budget deficit in

2016.

Going forward, Bank Indonesia estimates that economic expansion will continue in 2017. The

improving commodity price development and ongoing global economic improvement are expected to

be able to support export performance of Indonesia. With solid domestic demand and global increase,

investment is estimated to continuously improve. Interest rate decrease is also expected to be able to

boost domestic consumption and investment performance, which is supported by the implementation

of Government Policy Package. On the other hand, utilization of monetary easing space in a measured

way by maintaining macro-economic and financial system stability will also strengthen economic

growth momentum in the future.

However, external factors such as ongoing financial volatility coupled with sluggish trade and subdued

growth in advanced economies, continued deceleration of China’s economy, global policy uncertainty,

particularly concerning global trade agreements and the pace of interest rate normalization in the US

are the possible risks to the future growth outlook.

Domestic manufacturing sector is expected to recover with the help of supporting measures by the

government to boost the battering domestic manufacturing industries, especially to TPT sector to

improve its competitiveness. Government concerted efforts to protect the domestic industries by

imposing restriction on illegal imports, anti-dumping duties on Fiber and yarn, rationalization of

import duties etc. are expected to revive the growth prospects. The impact of capital injections

provided to selected state-owned enterprises (SOEs) dealing with infrastructure development is

expected yield results in the coming years. In addition, the government has introduced a number of

fiscal measures to support investment and export.





23

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies of the Company and its subsidiaries adopted in preparation of the

consolidated financial statements are set below:

a. Basis of Preparation of the Consolidated Financial Statements

The consolidated financial statements of PT Asia Pacific Fibers Tbk have been prepared in accordance

with the Indonesian Financial Accounting Standards (“SAK”) comprising of the Statements of

Financial Accounting Standards (“PSAK”) and its Interpretation Financial Accounting Standards

(“ISAK”), issued by the Board of Financial Accounting standard of the Indonesia Institute of

Accountant (“DSAK – IAI”), and the regulations and guidelines for financial statement presentation

established by Financial Service Authority (“OJK” for merly BAPEPAM – LK) No. VIII.G7 regarding

“Emiten or Public Company’s Financial Statements Presentation and Disclosure Guidelines as included in

the appendix of the Decision Degree of the chairman of BAPEPAM – LK No KEP-347/BL/2012 dated

June 25, 2012.

The consolidated financial statements for the years ended December 31, 2016 and 2015 have been

prepared in accordance with PSAK No. 1 (Revised 2013), “Presentation of Financial Statements”. In

accordance with PSAK No. 1 (Revised 2013), the consolidated statement of profit or loss and other

comprehensive income has been presented in the consolidated financial statements. The Company and

its Subsidiaries have been elected to present all items of income and expense in the single statement.

And in relation to the amendment to PSAK No. 4, “Separate Financial Statements”, the Company

has measured investment in subsidiaries using cost method.

As of August 19, 2011, the Commercial Court had declared that the Subsidiary (PT Texmaco Jaya Tbk)

is bankruptcy and insolvency effective on September 26, 2011. Effective this period, the Subsidiary

becomes subject to the control of the Court, and causing the Company loss its controls.

The consolidated financial statements have been prepared on the historical cost basis of accounting,

except for the certain accounts are prepared based on the other measurement that are more fully

described in the accounting policies below. The consolidated financial statements are prepared under

the accrual basis of accounting, except for the consolidated statement of cash flows.

The consolidated statements of cash flows are prepared using the direct method and present the sources

and uses of cash and cash equivalents according to operating, investing and financing activities. Cash

and cash equivalents consist of cash on hand, cash in banks and deposits with original maturities

of 3 (three) months or less.

The reporting currency used in preparation of the consolidated financial statements is

US Dollar (“US$”), which is also the Company’s functional and presentation currency. All figures

presented in the consolidated financial statements are stated at absolute amounts of US$, unless

otherwise specified. Refer to Note 3c for the information on the functional currency.

The Company has received approval from Bank Indonesia with letter No. 17/1192/DKSP dated

August 11, 2015 for translating using US$ as currency of transaction until July 2016 in relation

to Bank Indonesia rule No. 17/3/PBI/2015. Further, based on letter from Bank Indonesia

No. 18/1145/DKSP/Srt/B dated August 18, 2016, the Company has received the permission to extend

using US$ as currency of transaction.





24

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

b. Principles of Consolidation

(a) Subsidiaries

Subsidiaries are all entities (including structured entities) which the Company has control. The

Company controls an entity when the Company is exposed to, or has rights to, variable returns

from its involvement with the entity and has the ability to affect those returns through its power

over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to

the Company. They are de-consolidated from the date on which than control ceases.

The Company applies the acquisition method to account for business combinations. The

consideration transferred for the acquisition of a subsidiary is the fair value of the assets

transferred, the liabilities incurred to the former owners of the acquireee and the equity interests

issued by the Company. The consideration transferred includes the fair value of any asset or

liability resulting from a contingent consideration arrangement. Identifiable assets acquired and

liabilities and contingent liabilities assumed in a business combination are measured initially at

their fair values at the acquisition date.

The Company recognises any non – controlling interest in the acquiree on an acquisition-by-

acquisition basis, either at fair value or at the non – controlling interest’s proportionate share of

the acquiree’s net assets. Non – controlling interest is reported as equity in the consolidated

statement of financial position, separate from the owner of the parent’s equity.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, at the acquisition date fair value of the acquirer’s

previously held equity interest in the acquiree is re-measured to fair value at the acquisition date

through profit or loss.

Any contingent consideration to be transferred by the Company is recognized at fair value at the

acquisition date. Subsequent changes to the fair value of the contingent consideration that is

deemed to be an asset or liability is recognized in accordance with PSAK 55 (Revised 2011)

“Financial Instrument: Recognition and Measurement” in the consolidated statements of profit or

loss and other comprehensive income. Contingent consideration that is classified as equity is not

re-measured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred the amount of any non – controlling interest in the

acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the

fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration

transferred, non-controlling interest recognised and previously held interest measured is less than

the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the

difference is recognised directly in the statement of profit or loss and other comprehensive income.

Inter – company transactions, balances and unrealised gains on transactions between group

companies are eliminated. Unrealised losses are also eliminated. When necessary amounts

reported by subsidiaries have been adjusted to conform to the Company’s accounting policies.





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b. Principles of Consolidation (Continued)

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for

as equity transactions. The difference between the fair value of any consideration paid and the

relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity

and attributable to owners of the Company. Gains or losses on disposals to non-controlling

interests are also recorded in equity.

(c) Disposal of subsidiaries

When the Company ceases to have control, any retained interest in the entity is re-measured to its

fair value at the date when the control is lost, with the change in carrying amount recognized in

the consolidated statements of profit or loss and other comprehensive income. The fair value is

the initial carrying amount for the purposes of subsequently accounting for the retained interest as

an associate, joint venture or financial asset.

In addition, any amounts previously recognized in other comprehensive income in respect of that

entity are accounted for as if the Company had directly disposed of the related assets or liabilities.

This may mean that amounts previously recognized in other comprehensive income are

reclassified to consolidated profit or loss.

c. Foreign Currency Transaction and Balances

Functional and presentation currency

Items included in the consolidated financial statements of each of the Company and its

Subsidiaries are measured using the currency of the primary economic environment in which the

entity operates (“functional currency”).

The consolidated financial statements are presented in US Dollar, which is the functional and

presentation currency of the Company and its Subsidiaries.

Transactions and balances

Foreign currency transactions are translated into US Dollar using the exchange rates prevailing at

the dates of the transactions. At each reporting date, monetary assets and liabilities denominated

in foreign currencies are translated into US Dollar using the closing exchange rate. Exchange rate

used as benchmark is the rate which is issued by Bank Indonesia.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the

translation at period-end exchange rates of monetary assets and liabilities denominated in foreign

currencies are recognized in the consolidated statements of profit or loss and other comprehensive

income.





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c. Foreign Currency Transaction and Balances (Continued)

Transactions and balances (Continued)

Foreign currency 2 0 1 6 2 0 1 5

Rp Rp

US$ 1 13,436 13,795

JPY 1 115 115

CHF 1 13,178 13,951

SGD 1 9,299 9,751

GBP 1 16,507 20,451

EUR 1 14,162 15,070

SEK 1 1,559 1,639

d. Transactions with Related Parties

The Company and its Subsidiaries enters into transactions with related parties as defined in amendment

to PSAK 7 “Related Party Disclosure”. Related party is principally defined as follows:

(i) A person or a close member of that person’s family is related to a reporting entity if that person:

Has control or joint control over the reporting entity.

Has significant influence over the reporting entity.

Is a member of the key management personnel of the reporting entity or of a parent of reporting

entity.

(ii) An entity is related to a reporting entity if any of the following conditions applies:

The entity and the reporting entity are members of the same group (which means that each

parent, subsidiary and fellow subsidiary is related to the others).

One entity is an associate or joint venture of the other entity (or an associate or joint venture

of a member of a group of which the other entity is a member).

Both entities are joint ventures of the same third party.

One entity is a joint venture of a third entity and the other entity is an associate of the third

entity.

The entity is a post-employment defined benefit plan for the benefit of employees of either

the reporting entity or an entity related to the reporting entity. If the reporting entity is itself

such a plan, the sponsoring employers are also related to the reporting entity.

The entity is controlled or jointly controlled by a person identified in (i).

A person identified in (i) has significant influence over the entity or is a member of the key

management personnel of the entity (or of a parent of the entity).





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d. Transactions with Related Parties (Continued)

All significant transactions and balances with related parties, whether or not conducted under normal

terms and conditions similar to those with third parties are disclosed in Note 42.

e. New and Amendment Accounting Standards and Interpretations

The following amendments accounting standards have been issued by the Indonesian Financial

Accounting Standards Board (“DSAK”) that are relevent to the Company’s financial statements for

periods beginning on or after January 1, 2016:

Improvement to PSAK 5 : Operating Segment

Amendment to PSAK 7 : Related Party Disclosures

Amendment to PSAK 16 : Property, Plant and Equipment

Amendment to PSAK 19 : Intangible Asset

Amendment to PSAK 24 : Employee Benefits on Defined Benefit Plans : Employee

Contributions

Amendment to PSAK 25 : Accounting Polices, Change in Accounting Estimates and Errors

Amendment to PSAK 65 : Consolidated Financial Statements

Amendment to PSAK 67 : Disclosure of Interests in Other Entities

Amendment to PSAK 68 : Fair Value Measurement

Discussed below are the provisions stated in the amendment accounting standards:

(i) Improvement to PSAK 5: “Operating Segment”

The improvement clarifies that an entity must disclose the judgments made by management in

applying the aggregation criteria in paragraph 12 of PSAK 5 including brief description of

operating segments that have been aggregated and the economic characteristics, and disclose the

reconciliation of segment assets to total assets if the reconciliation is reported to the chief

operating decision maker, similar to the required disclosure for segment liabilities.

(ii) Amendment to PSAK 7: “Related Party Disclosures” adopted from IAS 24.

This PSAK is amended to include, as a related party, an entity that provides key management

personnel services to the reporting entity or to the parent of the reporting entity (‘the

management entity’). The reporting entity is not required to disclose the compensation paid by

management entity to the management entity’s employees or directors, but it is required to

disclose the amounts charged to the reporting entity by management entity for services provided.

(iii) Amendment to PSAK 16: “Property , Plant and Equipment” adopted from IAS 16.

This PSAK is amended to clarify how the gross carrying amount and the accumulated

depreciation are treated where an entity uses the revaluation model. The carrying amount of the

asset is restated to the revalued amount.





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e. New and Amendment Accounting Standards and Interpretations (Continued)

Discussed below are the provisions stated in the amendment accounting standards: (Continued)

(iii) Amendment to PSAK 16: “Property , Plant and Equipment” adopted from IAS 16 (Continued)

The split between gross carrying amount and accumulated depreciation is treated in one of the

following ways:

a. Either the gross carrying amount is restated in a manner consistent with the revaluation of

the carrying amount, and the accumulated depreciation is adjusted to equal the difference

between the gross carrying amount and the carrying amount after taking into account

accumulated impairment losses; or

b. The accumulated depreciation is eliminated against the gross carrying amount of the asset.

Such changes are made in order that the net pension assets or liabilities are recognized in

the statement of financial position to reflect the full value of the plan deficit or surplus.

(iv) Amendment to PSAK 19: “Intangible Asset” adopted from IAS 38.

Similar with Amendment PSAK 16: “Property, Plant and Equipment”, this PSAK is also

amended to clarify how the gross carrying amount and the accumulated amortisation are treated

where an entity uses the revaluation model. The carrying amount of the asset is restated to the

revalued amount.

The split between gross carrying amount and accumulated amortisation is treated in one of the

following ways:

a. Either the gross carrying amount is restated in a manner consistent with the revaluation of

the carrying amount, and the accumulated amortisation is adjusted to equal the difference

between the gross carrying amount and the carrying amount after taking into account

accumulated impairment losses; or

b. The accumulated amortisation is eliminated against the gross carrying amount of the asset.

(v) Amendment to PSAK 24: “ Employee Benefits on Defined Benefit Plans : Employee

Contributions

The amandment of this PSAK 24 requires an entity to consider contributions from employee or

third parties when accounting for defined benefit plans. Where the contributions are linked to

service, they should be attributed to periods for service as a negative benefit. These amendments

clarify that, if the amount of the contributions is independent of the number of years of service,

an entity is permitted to recognise such contributions as a reduction in the service cost in the

period in which the service is rendered, instead of allocating the contributions to the period of

service.





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e. New and Amendment Accounting Standards and Interpretations (Continued)

Discussed below are the provisions stated in the amendment accounting standards: (Continued)

(vi) Amendment to PSAK 25: “Accounting Polices, Changes in Accounting Estimates and Errors”,

adopted from IAS 8

The amendment of this PSAK is to correcting paragraph 7 of PSAK 25 relating to the limitation on

restrospective application.

(vii) Amendment to PSAK 65: “Consolidated Financial Statements”

The amendments clarify that the exemption from presenting consolidated financial statements

applies to a parent entity that is a subsidiary of an investment entity, when the investment entity

measures all of its subsidiaries at fair value.

(viii) Amendment to PSAK 67: “Disclosure of Interests in Other Entities”

The amendments to PSAK 67 clarify that an investment entity that prepares financial statements

in which all of its subsidiaries are measured at fair value through profit or loss in accordance

with PSAK 65 shall present the related disclosures required by PSAK 67.

(ix) Amendment to PSAK 68: “Fair Value Measurement”, adopted from IFRS 13

This PSAK is amended to clarifies that the portfolio exception in PSAK 68, which allows an

entity to measure the fair value of a group of financial assets and financial liabilities on a net

basis, applies to all contracts (including non-financial contracts) within the scope PSAK 55.

An entity shall apply the amendment prospectively from the beginning of the first annual period

in which PSAK 68 is applied.

The following amendment, interpretation, and new accounting have been issued by the Indonesian

Financial Accounting Standards Board (“DSAK”) effective for periods beginning on or after January

1, 2016. These accounting standards are not relevant to the Company’s financial statements.

Amendment to PSAK 4 : Separate Financial Statements

Amendment to PSAK 13 : Investment Property

Amendment to PSAK 15 : Investment in Associates and Joint Ventures

Amendment to PSAK 22 : Business Combination

Amendment to PSAK 53 : Share Based Payment

Amendment to PSAK 66 : Joint Arrangements

ISAK 30 : Levies

PSAK 70 : Accounting for Tax Amnesty Assets and Liabilities





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f. Financial assets

Classification

The Company and its Subsidiaries classifies its financial assets in the following categories: at fair

value through profit or loss, loans or receivables, available-for-sale, and held to maturity. The

classification depends on the purpose for which the financial assets were acquired. Management

determines the classification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial

asset is classified in this category if acquired principally for the purpose of selling in the short-

term. Derivatives are also categorized as held for trading unless they are designated as hedges.

Assets in this category are classified as current assets if they are expected to be settled within 12

months; otherwise, they are classified as non-current. On December 31, 2016 and 2015, the

Company and its Subsidiaries have no financial assets at fair value through profit or loss.

(b) Loans and receivables

Loans and receivables are non-derivate financial assets with fixed or determinable payments that

are not quoted in an active market. They are included in current assets, except for maturities greater

than 12 months after the end of reporting period. These are classified as non-current assets. The

Company and its Subsidiaries’ loans and receivables comprise “Trade Receivables, Other

Receivables, Other Current Financial Assets, Non-trade Receivables From Related Parties and

Other Non-Current Financial Assets” in the consolidated statements of financial position.

(c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category

or not classified in any of the other categories. They are included in non-current assets unless the

investment matures or management intends to dispose of it within 12 months of the end of the

reporting period. On December 31, 2016 and 2015, the Company and its Subsidiaries have no

available-for-sale financial assets.

(d) Held to maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable

payments and fixed maturity that the group has the positive intent and ability to hold maturity, and

which are not designated at fair value through profit or loss or available-for-sale. On December

31, 2016 and 2015, the Company and its Subsidiaries have no held to maturity financial assets.





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f. Financial assets (Continued)

Recognition and Measurement

Regular purchases and sale of financial assets are recognized on the trade date – the date on which the

Company and its Subsidiaries commits to purchase or sell the asset. Investments are initially

recognized at fair value plus the transaction costs for all financial assets nor carried at fair value

through profit or loss. Financial assets carried at fair value through profit or loss is initially recognized

at fair value, and transaction costs are expensed in the profit or loss. Financial assets are derecognized

when the rights to receive cash flows from the investments have expired or have been transferred and

the Company and its Subsidiaries have transferred substantially all risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit or loss are

subsequently carried at fair value. Loans and receivables and financial asset held to maturity are carried

at amortized cost using the effective interest method.

Net differences arising from changes in the fair value of the “financial assets at fair value through

profit or loss” category are presented in profit or loss within “finance income” in the period in which

they arise. Dividend income from financial assets at fair value through profit or loss is recognized in

the profit or loss as part of “other income” when the Company and its Subsidiaries’ right to receive

payments is established. Interest income from these financial assets is included in the “finance

income”.

Changes in the fair value of monetary and non-monetary securities classified as available for sale are

recognized in other comprehensive income.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments

recognized in equity are included in the consolidated statements of profit or loss and other

comprehensive income as “finance income” or “finance costs”.

Interest on available-for-sale securities calculated using the effective interest method is recognized in

the consolidated statement of profit or loss and other of comprehensive income as part of “finance

income”. Dividends on available-for-sale equity instruments are recognized in the profit or loss as part

of “other income” when the Company and its Subsidiaries’ right to receive payments is established.

Interest income on held-to-maturity financial assets is included in the consolidated statements of profit

or loss and other comprehensive income and reported as “interest income”.

g. Cash and Cash Equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short – term

highly liquid investments with original maturities of three months or less.





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h. Trade and Other Receivables

Trade receivables are amounts due from customers for product sold performed in the ordinary course of

business. If collection is expected in one year or less (or in the normal operating cycle of the business if

longer), they are classified as current assets. If not, they are presented as non-current assets.

Non-trade receivables from related parties are receivables balance reflecting loan given to related

parties of the Company and its Subsidiaries.

Trade and non-trade receivables are recognized initially at fair value and subsequently measured at

amortized cost using the effective interest method, if the impact of discounting is significant, less any

provision for impairment.

Collectability of trade and non-trade receivables is reviewed on an ongoing basis. Debts which are

known to be uncollectible are written off by reducing the carrying amount directly. An allowance

account is used when there is objective evidence that the Company and its Subsidiaries will not be

able to collect all amounts due according to the original terms of the receivables.

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or

financial reorganization and default or delinquency in payments are considered indicators that the trade

receivable is impaired.

The amount of the impairment allowance is difference between the asset’s carrying amount and the present

value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating

to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognized in the consolidated statement of profit or loss and

other comprehensive income within “Impairment charges”. When a trade and non-trade receivables

for which an impairment allowance had been recognized becomes uncollectible in a subsequent period,

it is written off against the allowance account. Subsequent recoveries of amounts previously written

off are credited against “miscellaneous income (expense), net” in the consolidated statements of profit

or loss and other comprehensive income.

i. Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the consolidated statements

of financial position when there is a legally enforceable right to offset the recognized amounts and

there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

j. Impairment of Financial Assets

A financial asset not classified as at fair value through profit or loss is assessed at each reporting date

to determine whether there is objective evidence that it is impaired. A financial asset is impaired if

there is objective evidence of impairment as a result of one or more events that occurred after the initial

recognition of the asset, and that loss event had an impact on the estimated future cash flows of that

asset that can be estimated reliably.





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j. Impairment of Financial Assets (Continued)

Objective evidence that financial assets are impaired includes default or delinquency by a debtor,

restructuring of an amount due to the Company and its Subsidiaries on terms that the debtor would not

consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the

payment status of borrowers or issuers, economic conditions that correlate with defaults or the

disappearance of an active market for a security.

The Company and its Subsidiaries considers evidence of impairment for financial assets (loans and

receivables) measured at amortized cost both at specific asset level and collective level. All

individually significant assets are assessed for specific impairment. Those found not to be specifically

impaired are then collectively assessed for any impairment that has been incurred but not yet identified.

Assets that are not individually significant are collectively assessed for impairment by grouping

together assets with similar risk characteristics.

In assessing collective impairment, the Company and its Subsidiaries uses historical trends of the

probability of default, the timing of recoveries and the amount of loss incurred, adjusted for

management’s judgment as to whether current economic and credit conditions are such that the actual

losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the

difference between its carrying amount and the present value of the estimated future cash flows

discounted at the asset’s original effective interest rate. Losses are recognized in the consolidated

statements of profit or loss and other comprehensive income and reflected in an impairment account

against loans and receivables. Interest on the impaired asset continues to be recognized. When an event

occurring after the impairment was recognized causes the amount of impairment loss to decrease, the

decrease in impairment loss is reversed through consolidated statements of profit or loss and other

comprehensive income.

k. Inventories

Inventories are carried at the lower of cost and net realizable value. Cost of inventories is determined

using on the average method, and includes expenditure incurred in acquiring the inventories,

production or conversion costs, and other costs incurred in bringing them to their existing location and

condition. In the case of manufactured inventories and work in progress, cost includes an appropriate

share of production overheads based on normal operating capacity. Net realizable value is the

estimated selling price in the ordinary course of business less the estimated costs of completion and

the estimated costs necessary to make the sale.

A provision for impairment regarding the obsolete and slow moving inventory is determined on the

basis of estimated future usage or sale of individual inventory items. The amount of any write-down

of inventories to net realizable value and all losses of inventories are recognized as an expense in the

period the write-down or loss occurs. The amount of any reversal of any write-down of inventories,

arising from an increase in net realizable value, is recognized as a reduction in the amount of

inventories recognized as an expense in the period in which the reversal occurs.





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l. Prepaid Expenses

Prepaid expenses are charged to operations over the periods benefit using the straight-line method.

m. Property, Plant and Equipment

Items of property, plant and equipment are measured at cost, less accumulated depreciation and any

accumulated impairment losses, if any, since the Company and its Subsidiaries adopt the cost model.

Cost includes expenditure that is directly attributable to the acquisition of the asset.

When parts of an item of property, plant and equipment have different useful lives, they are accounted

for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference

between the net proceeds from disposal and the carrying amount of the item) is recognized in the

consolidated statements of profit or loss and other comprehensive income.

Subsequent expenditure is capitalized only when it is probable that the future economic benefits

associated with the expenditure will flow to the Company and its Subsidiaries. Ongoing repairs and

maintenance are expensed as incurred.

Items of property, plant and equipment are depreciated from the date they are available for use or, in

respect of self-constructed assets, from the date that the asset is completed and ready for use.

Depreciation is calculated to write off the cost of items of property, plant and equipment less their

estimated residual values using the straight-line basis over their estimated useful lives. Depreciation

is generally recognized in the consolidated statements of profit or loss and other comprehensive

income, unless the amount is included in the carrying amount of another asset.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted

if appropriate.

Land is not depreciated.

Depreciation is recognized on straight-line basis to write down the depreciable amount of property,

plant and equipment. The estimated useful lives are as follows:

Years

Buildings and improvement 20

Machinery and equipment 3 - 20

Transportation equipment 5

Office equipment 5

Initial legal costs incurred to obtain legal rights are recognized as part of the acquisition cost of the

land, and these costs are not depreciated. Cost related to renewal of land rights are recognized as

intangible assets and amortized during the period of the land rights.





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n. Construction in Progress

Construction in progress is stated at cost and presented as part of property, plant and equipment. The

accumulated cost will be reclassified to the appropriated property, plant and equipment account when

the construction is substantially completed and the asset is ready for its intended use.

o. Intangible asset

The certain cost associated with the renewal of legal titles on the landrights are deferred and amortized

during twenty (20) years.

p. Impairment of Non-Financial Assets

At the end of each reporting period, the Company assesses whether there is an indication that an asset

may be impaired. If any such indication exists, the recoverable amount is estimated for the individual

asset.

The recoverable amount of an asset is the higher of the asset’s fair value less costs to sell and its value

in use. Where the carrying amount of the asset exceeds its recoverable amount, the assets is considered

impaired and is written down to its recoverable amount. Impairment loss of continuing operations are

recognized in the consolidated statement of profit or loss and other comprehensive income as

“Impairment Loss”.

Reversal of an impairment loss is recognized in statement of profit or loss and other comprehensive

income. After such a reversal, the depreciation charge on that asset is adjusted in future period to

allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its

remaining useful life.

q. Leases

Determination whether an arrangement is, or contains, a lease is made based on the substance of the

arrangement and assessment of whether fulfillment of the arrangement is dependent on the use of a

specific asset or assets, and the arrangement convey a right to use the asset. Leases in which a

significant portion of the risks and rewards of ownership are retained by the lessor are classified as

operating leases. Payments made under operating lease (net of any incentives received from the lessor)

are charged to consolidated statement of profit or loss and other comprehensive income on a straight-

line basis over the term of the lease.

Each lease payment is allocated between the liability and finance charges so as to achieve a effective

rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges,

are included in “Credit Financing Payables”. The interest element of the finance cost is charged to the

consolidated statement of comprehensive income over the lease period so as to produce an effective

interest rate on the remaining balance of the liability for each period.





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r. Financial Liabilities

The Company and its Subsidiaries initially recognizes liabilities on the date that they are originated.

All other financial liabilities are recognized initially on the trade date, which is the date that the

Company and its Subsidiaries becomes a party to the contractual provisions of the instrument.

The Company and its Subsidiaries classify non-derivative financial liabilities into the other financial

liabilities category which comprise Trade Payables, Accrued Expenses, Bank Loans, Secured Debts,

Other Short-term Financial Liabilities, and Borrowing from Other Financial Institution (such as: Credit

Financing Payables, Unsecured Debts and Notes Payable and Working Capital Loans). Such financial

liabilities are recognized initially at fair value less any directly attributable transaction costs.

Subsequent to initial recognition, these financial liabilities are measured at amortized cost; any

difference between the proceeds (net of transaction costs) and the redemption value is recognized in

the consolidated statement of comprehensive income over the period of the borrowings using the

effective interest method.

Bank Loans, Secured Debts, Borrowing from Other Financial Institution are raised for support of

short-term funding of operations.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary

course of business from suppliers. Accounts payable are classified as current liabilities if payment is

due within one year or less (or in the normal operating cycle of the business if longer). If not, they are

presented as non-current liabilities.

The Company and its Subsidiaries derecognizes a financial liability when its contractual obligations

are discharged, cancelled or expire.

s. Determination of Fair Value

Fair value is defined as the amount at which the financial instruments could be exchanged in a current

transaction between knowledgeable, willing parties in an arm’s length transaction, other than in a

forced sale or liquidation. Fair values are obtained from quoted prices, discounted cash flow models,

as appropriate.

The fair values less any estimated credit adjustments for financial assets and liabilities with a maturity

of less than one year are assumed to approximate to their fair values. The fair value of financial

liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the

current market interest rate available to the entity for similar financial instruments.

t. Government Grant

Government grants are assistance by government in the form of transfers of resources to an entity in

return for past or future compliance with certain conditions relating to the operating activities of the

entity. And the grants related to assets are government grants whose primary condition is that an entity

qualifying for them should purchase, construct or otherwise acquire long-term assets.





37


t. Government Grant (Continued)

A Government grant is recognized only when there is reasonable assurance that the entity will comply

with any conditions attached to the grant and the grant will be received.

There are two broad approaches to the accounting for government grants: the capital approach, under

which a grant is recognized outside the consolidated statements of profit or loss and other

comprehensive income, and the income approach, under which a grant is recognized in the

consolidated statements of profit or loss and other comprehensive income over one or more period.

The Company adopts the income approach model and they recognized a government grants through

deferred income. It will be amortized as income over the period necessary to match them with related

cost of property, plant and equipments, for which they are intended to compensate, on a systematic

basis (20 years).

u. Employment Benefit

(i) Short-term employee benefits liabilities

The short-term employee benefits consist of salary and related remuneration, bonuses, incentives,

and other short-term employee benefits are recognized as expense and are not discounted when

the employee has provided services to the Company.

(ii) Post-employment obligation

Post-employment benefits such as retirement, severance and service payments are calculated based

on Labour Law No. 13/2003 (“Law 13/2003”). In accordance with Law 13/2003, the Company

and its Subsidiaries have further payment obligations if the benefits provided by the existing plan

do not adequately cover the obligations under Law 13/2003.

The liability recognized in the consolidated statement of financial position in respect of defined

benefit pension plans is the present value of the defined benefit obligation at the end of the

reporting period less the fair value of plan assets. The defined benefit obligation is calculated

annually by independent actuaries using the projected unit credit method. The present value of the

defined benefit obligation is determined by discounting the estimated future cash outflows using

interest rates of Government Bonds (considering currently there is no deep market for high-quality

corporate bonds) that are denominated in the currency in which the benefits will be paid, and that

have terms to maturity approximating to the terms of the related pension obligation.

Typically, defined benefit plans define an amount of pension benefit that an employee will receive

on retirement, usually dependent on one or more factors such as age, years of service and

compensation.

The present value of the defined benefit obligation is determined by discounting the estimated

future cash outflows using interest rates of Government Bonds (considering currently there is no

deep market for high-quality corporate bonds) that are denominated in the currency in which the

benefits will be paid, and that have terms to maturity approximating to the terms of the related

pension obligation.





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u. Employment Benefit (Continued)

(ii) Post-employment obligation (Continued)

Actuarial gains and losses arising from experience adjustments and changes in actuarial

assumptions charged or credited to equity in other comprehensive income in the period in which

they arise.

Past-service costs are recognised immediately in profit or loss. Gains or losses on the curtailment

or settlement of a defined benefit plan are recognised in profit or loss when the curtailment or

settlement occurs.

(iii) Termination benefits

The Company and its Subsidiaries shall recognize termination benefits as a liability and an expense

when, and only when, the Company and its Subsidiaries are demontrably committed to either,

terminate the employment of employee before the normal retirement date, or provide termination

benefits as a result of an offer made in order to encourage voluntary redundancy based on a detailed

formal plan and without realistic possibility of withdrawal. Where termination benefits fall due

more than 12 months after the reporting period, they should be discounted using the discount rate.

(iv) Bonus

The Company and its Subsidiaries recognized a liability and an expense for bonuses based on a

formula that takes into consideration the profit attributable to the Company and its Subsidiaries’

shareholder after certain adjustments. The Company and its Subsidiaries recognized a provision

where contractually obliged or where there is a past practice that has created a constructive

obligation.

v. Income Tax

The income tax expense comprises current and deferred income tax. Tax is recognized in the

consolidated statements of profit or loss and other comprehensive income account, except to the extent

that it relates to items recognized directly to equity and other comprehensive income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively

enacted at the reporting date. Management periodically evaluates positions taken in tax returns with

respect to situations in which applicable tax regulation is subject to interpretation. It establishes

provision where appropriate on the basis of amounts expected to be paid to the tax authorities.





39


v. Income Tax (Continued)

Deferred income tax is recognized, using balance sheet liability method, on temporary differences

arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated

financial statements. Deferred income tax is determined using tax rates that have been enacted or

substantially enacted as at reporting period and is expected to apply when the related deferred income

tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are

recognized only to the extent that it is probable that future taxable profit will be available against which

the temporary differences can be utilized.

Amendments to tax obligations are recorded when an assessment is received or, for assessment

amounts appealed against by the Company and its Subsidiaries, when: (1) the result of the appeal is

determined, unless there is significant uncertainty as to the outcome of such appeal, in which case the

impact of the amendment of tax obligations based on an assessment is recognized at the time making

such appeal, or (2) at the time based on knowledge of developments in similar cases involving matters

appealed by the Company and its Subsidiaries, based on rulings by the Tax Court or the Supreme

Court, that a positive outcome of the Company and its Subsidiaries’ appeals is adjudged to be

significantly uncertain, in which event the impact of an amendment of tax obligations based on the

assessment amounts appealed is recognized.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset

current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities

relate to income taxes levied by the same taxation authority on either the same taxable entity or

different taxable entities where there is an intention to settle the balances on a net basis.

w. Additional Paid-in Capital

Expenses related to the issuance of the Company’s shares to the public were deferred and amortized

over a ten-year period using the straight-line method. In 1997, the Company opted to amortize the

remaining balance of this account over five years. Based on BAPEPAM’s decision letter KEP-

No.06/PM/2000 dated March 13, 2000, the share issuance costs were retroactively recorded into

“Additional Paid-in Capital”.

x. Revenue and Expense Recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods in

the ordinary course of the Company and its Subsidiaries’ activities. Revenue is shown net of value-

added tax, returns, rebates and discounts.

The Company and its Subsidiaries recognizes revenue when the amount of revenue can be reliably

measured; it is probable that future economic benefits will flow to the entity; and when specific criteria

have been met for each of the Company and its Subsidiaries’ activities as described below. The

Company and its Subsidiaries bases its estimates on historical results, taking into consideration the

type of customer, the type of transaction and the specifics of each arrangement.





40


x. Revenue and Expense Recognition (Continued)

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the entity

and the revenue can be reliably measured. The following specific recognition criteria must also be met

before revenue is recognized:

(i) Sale of goods – Revenue is recognized when the risks and rewards of ownership of the goods have

passed to the buyer, i.e. generally when the goods are delivered to the customers.

(ii) Interest income – Revenue is recognized as the interest accrues taking into account the effective

yield of the asset.

Expenses are recognized upon utilization of the service or at the date they are incurred.

y. Earnings per Share

Basic earnings per share are calculated by dividing the profit (loss) attributable to the equity holders

of the Company by the weighted average number of ordinary shares outstanding during the period.

For purposes of calculating diluted earnings per share, the profit or loss attributable to the Company’s

ordinary equity holders will be adjusted for the after-tax effects of interest recognized during the period

on convertible bonds.

z. Segment Information

Operating segments are reported in a manner consistent with the internal reporting provided to the

chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating

resources and assessing performance of the operating segments, has been identified as Board of

Director that makes strategic decisions.

An operating segment is a component of an entity:

1. that engages in business activities from which it may earn revenue and incur expenses (including

revenue and expenses relating to the transaction with other components of the same entity);

2. whose operating results are reviewed regularly by the entity’s chief operating decision maker to

make decision about resources to be allocated to the segments and assess its performance; and

3. for which discrete financial information is available.





41

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of the consolidated financial statements in conformity with PSAK requires management

to make judgments, estimates and assumptions that affect the application of accounting policies and the

reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognized in the period in which the estimates are revised and in any future periods affected.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next 12 months are addressed below.

a. Judgments

In the process of applying the 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.

Functional currency

The functional currency of the Company and its Subsidiaries are the currency of the primary economic

environment in which each entity operates. The Company and its Subsidiaries considers some factors

in determining its functional currency, among others, the currency that mainly influences the revenue,

cost and financing activities, and the currency in which receipts from operating activities are usually

retained.

Based on the economic substance of the underlying circumstances relevant to the Company and its

Subsidiaries, the functional currency has been determined to be United States Dollar (US$), as this

reflected the fact that majority of the Company and its Subsidiaries’ operational businesses are

influenced by pricing in internationally commodity markets with a United States’ economic

environment (US$).

Estimating Allowance for Impairment Losses on Receivables

The Company and its Subsidiaries performs regular review of the age and status of its receivables,

designed to identify accounts with objective evidence of impairment and provides these with the

appropriate allowance for impairment losses.

The review is accomplished using a combination of specific and collective assessment approaches,

with the impairment losses being determined for each risk grouping identified by the Company and its

Subsidiaries. The amount and timing of recorded expenses for any period would differ if the Company

and its Subsidiaries made different judgments or utilized different methodologies.

As of December 31, 2016 and 2015, total allowance for impairment losses recognized on the Company

and its Subsidiaries’ receivables amounted to US$ 195,258,354, in both years (see Notes 6, 7 and 12).





42

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

a. Judgments (Continued)

Estimating Net Realizable Value of Inventories

In determining the net realizable value (NRV) of inventories, the Company and its Subsidiaries

considers inventory obsolescence, damages, physical deterioration, changes in price levels, changes in

consumer demands, or other causes to identify inventories which are to be written down to NRV. The

Company and its Subsidiaries adjusts the cost of inventories to recoverable amount at a level

considered adequate to reflect market decline in the value of the inventories.

As of December 31, 2016 and 2015, total allowance for impairment losses recognized on the Company

and its Subsidiaries’ inventories amounted to US$ 164,050 and US$ 122,685, respectively (Note 9).

Impairment of Property, Plant and Equipment and Intangible Assets

PSAK requires that an impairment review be performed on property, plant and equipment and

intangible assets when events or changes in circumstances indicate that the carrying amount may not

be recoverable. Determining the net recoverable amount of assets requires the estimation of cash flows

expected to be generated from the continued use and ultimate disposition of such assets. While it is

believed that the assumptions used in the estimation of fair values reflected in the financial statements

are appropriate and reasonable, significant changes in these assumptions may materially affect the

assessment of recoverable amounts and any resulting impairment loss could have a material adverse

impact on the results of operations.

As of December 31, 2016 and 2015, there was no allowance for impairment losses recognized on the

Company’s property, plant and equipment and intangible assets (Notes 14 and 15)

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 Fair Value of Financial Instruments

Management uses valuation techniques, including the discounted cash flow model in measuring the

fair value of financial instruments where active market quotes are not available.

In applying the valuation techniques, management makes maximum use of market inputs, and uses

estimates and assumptions that are, as far as possible, consistent with observable data that market

participants would use in pricing the instrument.Where applicable data is not observable, management

uses its best estimate about the assumptions that market participants would make. These estimates may

vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.





43

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (Continued)

b. Estimates and Assumptions (Continued)

Estimating Allowance for Impairment Loss on Receivables

The level of a specific allowance is evaluated by management on the basis of factors that affect the

collectability of the accounts. Any collective allowance recognized is based on historical loss

experience using various factors such as historical performance of the debtors within the collective

group and judgments on the effect of deterioration in the markets in which the debtors operate and

identified structural weaknesses or deterioration in the cash flows of debtors.

Estimating Useful Lives of Property, Plant and Equipment and Intangible Assets

The Company and its Subsidiaries estimates the useful lives of its property, plant 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, plant and equipment and intangible assets is based on the Company and its

Subsidiaries’ collective assessment of industry practice, internal technical evaluation and experience

with similar assets. The estimated useful lives are reviewed at least each financial year 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 are

affected by changes in these factors and circumstances. A reduction in the estimated useful lives of

the Company and its Subsidiaries’ property, plant and equipment and intangible assets increases the

recorded operating expenses and decreases non-current assets. An extension in the estimated useful

lives of the Company and its Subsidiaries’ property, plant and equipment and intangible assets

decreases the recorded operation expenses and increases non-current assets.

Estimation of Pension and Employees’ Benefit

The present value of the pension obligations depends on a number of factors that are determined on an

actuarial basis using a number of assumptions. The assumptions used in determining the net cost

(income) for pensions include the discount rate and future salary increase. Any changes in these

assumptions will have an impact on the carrying amount of pension obligations. The discount rate is

interest rate that should be used to determine the present value of estimated future cash outflows

expected to be required to settle the pension obligations.In determining the appropriate discount rate,

the Company and its Subsidiaries considers the interest rates of government bonds that are

denominated in the currency in which the benefits will be paid and that have terms to maturity

approximating the terms of the related pension obligation. For the rate of future salary increases, the

Company and its Subsidiaries collects all historical data relating to changes in base salaries and adjusts

it for future business plans.

Other key assumptions for pension obligations are based in part on current market conditions.

Additional information is disclosed in Notes 25 and 26.





44

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (Continued)

b. Estimates and Assumptions (Continued)

Realization of Deferred Tax Assets

Determining provision for corporate income tax requires significant judgment by management. There

are certain transactions and computation for which the ultimate tax determination is uncertain during

the ordinary course of business. The Company and its Subsidiaries recognizes liabilities for expected

corporate income tax issues based on estimates of whether additional corporate income tax will be

due. Where the final tax outcome of these matters is different from the amount that are initially

recorded, such differences will have an impact on the current and deferred tax assets and liabilities in

the period in which such determination is made.

The Company and its Subsidiaries conducted a review of the carrying amount of deferred tax assets at

every reporting period and reduce the value of such assets by as much as possible cannot be realized,

where the availability of taxable income allow to use all or part of the deferred tax assets. The

Company and its Subsidiaries’ review on the recognition of deferred tax assets for deductible

temporary difference can be deductible based on the level and timing from the estimated taxable

income for the next reporting period.

The estimation is based on the achievement of the Company and its Subsidiaries in the past and future

expectation toward income and expenses, as well as with the tax planning strategies in the future. But

there is no certainty that the Company and its Subsidiaries can generate sufficient taxable income to

allow use of part or all of these deferred tax assets.

5. CASH AND CASH EQUIVALENTS

2 0 1 6 2 0 1 5

US$ US$

Cash on hand:

Rupiah 30,317 50,337

US Dollar 60,741 26,187

Singapore Dollar 5,240 6,164

European Euro 12 1,428

Norwegian Krone 129 125

96,439 84,241

Cash in banks:

Third Parties:

Deutsche Bank, Jakarta

US Dollar account 1,289,847 843,545

Rupiah account 1,211,430 652,801

Carried forward 2,501,277 1,496,346





45

5. CASH AND CASH EQUIVALENTS (Continued)

2 0 1 6 2 0 1 5

US$ US$

Cash in banks: (Continued)

Third Parties: (Continued)

Brought forward 2,501,277 1,496,346

PT Bank CIMB Niaga Tbk

US Dollar account 23,270 73,786

Rupiah account 265,382 672,495

PT Bank Central Asia Tbk



PT Bank Negara Indonesia (Persero) Tbk


3,372,030 2,572,907

Total 3,468,469 2,657,148

Cash at bank can be withdrawn at any time.

All accounts in banks earn interest at floating rates based on the offered rate from each bank.

The Company and its Subsidiaries do not have related party relationship with the banks where cash

and cash equivalents are placed.

The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each

class of cash and cash equivalents is disclosed in Note 48.

6. TRADE RECEIVABLES

This account consists of:

2 0 1 6 2 0 1 5

US$ US$

Third parties 31,584,686 31,567,047

Related party – –

Total 31,584,686 31,567,047





46

6. TRADE RECEIVABLES (Continued)

Third parties:

2 0 1 6 2 0 1 5

US$ US$

Local debtors 28,711,665 29,163,733

Foreign debtors 2,873,021 2,403,314

Total 31,584,686 31,567,047

Less: Allowance for impairment − −

Total 31,584,686 31,567,047

Due to the short-term nature of trade receivables from third parties, their carrying amount approximates

their fair values.

The aging of trade receivables from third parties is as follows:

2 0 1 6 2 0 1 5

US$ US$

Up to 1 month 28,964,976 29,326,957

> 1 month – 3 months 1,474,918 692,175

> 3 months – 6 months 937,172 235,543

> 6 months – 1 year 207,620 1,312,372

Total 31,584,686 31,567,047

There is no recent history of default of trade receivables from third parties.

The details of trade receivables from third parties based on currencies are as follows:

2 0 1 6 2 0 1 5

US$ US$

United States Dollar 21,158,049 22,678,731

Rupiah

(Rp 140,092,294,366 in 2016 and Rp 122,614,319,220 in 2015) 10,426,637 8,888,316

Total 31,584,686 31,567,047

All amounts of trade receivables from third parties do not bear any interest and have been reviewed for

indication of impairment. Based on the review of the status of individual trade receivables from third

parties, the Company and its Subsidiaries’ management determined that the trade receivables from third

parties are not impaired.





47


The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable

is disclosed in Note 48.

Related party:

2 0 1 6 2 0 1 5

US$ US$

PT Texmaco Jaya Tbk (under bankruptcy) 15,657,945 15,657,945

Less: Allowance for impairment (15,657,945 ) (15,657,945 )

Net – –

Due to the short-term nature of trade receivables from related party, their carrying amount approximates

their fair values.

The aging of trade receivables from related party is as follows:

2 0 1 6 2 0 1 5

US$ US$

Up to 1 month – –

> 1 month – 3 months – –

> 3 months – 6 months – –

> 6 months – 1 year – –

> 1 year 15,657,945 15,657,945

Total 15,657,945 15,657,945

Changes in the allowance for impairment from related party are as follows:

2 0 1 6 2 0 1 5

US$ US$

Beginning balance 15,657,945 15,657,945

Movement during the year:

Addition – –

Deduction – –

Ending balance 15,657,945 15,657,945





48


All amounts of trade receivables from related party do not bear any interest and have been reviewed for

indication of impairment. Based on the review of the status of the trade receivables from related party,

management believes that the carrying value is a reasonable approximation of fair value.

Based on the notarial deed of DR. H. Teddy Anwar, S.H. No. 111 dated August 16, 2002, the shares of

PT Multikarsa Investama (“MKI”) were sold to PT Bina Prima Perdana (Note 28), thus MKI is no longer

included as the Company’s shareholder. Accordingly, this account in the 2015 and 2014 consolidated

financial statements have been reclassified in line with the presentation of the 2016 consolidated financial

statements (Note 51).



Trade receivables amounted to US$ 45,000,000 in 2016 and 2015, respectively are used as collateral for

the Company’s bank loans that were received from Damiano Investments BV., Netherland (Note 18).

7. OTHER RECEIVABLES

2 0 1 6 2 0 1 5

US$ US$

Third parties:

Insurance claims 738,460 84,336

Interest receivables from income tax art 26 fiscal year 2007 733,941 −

Receivables from employees 207,247 181,885

Receivables from purchase discounts 123,134 1,182,276

Interest receivables on time deposits 513 1,376

Receivables from import clearance 179 57,110

Others 116,231 186,312

1,919,705 1,693,295





49

7. OTHER RECEIVABLES (Continued)

2 0 1 6 2 0 1 5

US$ US$

Other third parties:

Operational Advances to:

PT Wismakarya Prasetya (under bankruptcy) 34,267,327 34,267,327

PT Wastra Indah 15,762,180 15,758,847

PT Texmaco Perkasa Engineering Tbk 5,648,027 5,658,427

PT Wahana Perkasa Auto Jaya 5,579,991 5,579,991

PT Sumatex Subur 3,192,784 3,192,784

PT Texmaco Taman Synthetics 3,013,010 3,007,542

PT Bina Prima Perdana 420,174 409,240

PT Jaya Perkasa Engineering 318,770 310,475

PT Perkasa Heavindo Engineering 194,587 194,587

PT Raja Busana Mahameru 136,945 136,945

PT Supermitory Utama Tbk 93,407 93,407

PT Saritex Jaya Swasti 54,802 53,862

PT Devrindo Widya 25,434 25,434

PT Perkasa Indobaja 15,816 15,816

PT Perkasa Indosteel 13,327 13,327

PT Wahana Jaya Perkasa 11,102 11,102

PT Bina Peranan Busana 2,336 2,336

PT Citra Indah Textile 985 985

Total 68,751,004 68,732,434


Net 1,113,248 1,094,678

Total 3,032,953 2,787,973

Other receivables from employees represent advances to employees. These advances are not subject to

interest and the payments are made based on the terms of the repayment schedule.

Other receivables from these above companies represent the loans and advances for working capital

purposes. The loans and advances are not subject to interest and have no terms of repayment. Until now,

these companies are unable to pay their payables to the Company and its Subsidiaries due to their financial

difficulties. Most of the companies have already stopped operations and are still under the restructuring

program with PT Perusahaan Pengelola Asset (PPA). As of March 2017, the debt restructuring program

has not yet been completed.





50

7. OTHER RECEIVABLES (Continued)

The payment made by the Company to PT Wismakarya Prasetya (under bankruptcy) in excess of the

invoice amount in treated as other receivables to PT Wismakarya Prasetya (under bankruptcy) in line with

the agreement between PT Wismakarya Prasetya (under bankruptcy) and the Company on November 16,

2006, and the working capital provided to PT Wismakarya Prasetya was towards payment of old dues to

PT Perusahaan Gas Negara (PGN), PT Perusahaan Listrik Negara (PLN) and taxation. The Company has

lodged its claims with the curator for the dues amounting to Rp 279,593,977,457 of principal value and

Rp 206,051,448,529 towards interest amount. It is being discussed with the curator.

In compliance of PSAK requirement with regard to “Impairment of Receivables” in view of the fact that

PT Wismakarya Prasetya being declared as bankrupt and the liquidation process has commenced, the

Company have already provided allowance for impairment of receivables included in the allowance for

impairment as of December 31, 2016. However, it will continue to pursue with the curator for the

settlement of its dues from PT Wismakarya Prasetya.

Due to the short-term nature of other receivables, their carrying amount approximates their fair values.

Changes in the allowance for impairment are as follows:

2 0 1 6 2 0 1 5

US$ US$


Movement during the year:

Addition – –

Deduction – –

Ending balance 67,637,756 67,637,756

The details of other receivables based on currencies are as follows:

2 0 1 6 2 0 1 5

US$ US$

United States Dollars 36,771,433 35,014,616

Rupiah

(Rp 455,470,672,336 in 2016 and

Rp 488,496,290,040 in 2015) 33,899,276 35,411,113

Total 70,670,709 70,425,729

All amounts of other receivables have been reviewed for indication of impairment. Based on the review

of the status of individual other receivables, the Company and its Subsidiaries’ management believe that

the impairment of other receivables are adequate to cover possible losses on uncollectible other

receivables.







51

8. OTHER CURRENT FINANCIAL ASSETS


2 0 1 6 2 0 1 5

US$ US$

Time deposits:

Third party:

Deutsche Bank, Jakarta 148,854 289,960

Bank guarantees / SBLC 5,381,655 5,381,655

Security deposits:

Third parties:

Security deposit for electricity 301,987 127,220

Security deposit for rental 53,615 153,724

Others 19,952 16,816

375,554 297,760

Total 5,906,063 5,969,375

a. Time Deposits

In 2016, time deposit with Deutsche Bank, Jakarta of Rp 2,000,000,000 (equivalent to US$ 148,854)

represents one year time deposit with interest rate of 4.1% per annum, due on October 5, 2017.


represents one year time deposit with interest rate of 7.00% per annum, due on December 12, 2016.


represents one year time deposit with interest rate of 8.50% per annum, due on October 3, 2016.

b. Bank Guarantees / SBLC

The Company and PT Perusahaan Gas Negara (Persero) Tbk have signed an agreement

No. 011700.PK/HK.02/USH/2014 for the supply of gas to the Company. Additionally as per the

agreement, the Company should pay the past penalty of Rp 22,500,000,000 over a period of 45 months.

Based on the amendment of the agreement dated October 20, 2015, both parties agreed to amend the

maximum limit for the gas consumption for the period November 1, 2015 until December 31, 2018.





52

8. OTHER CURRENT FINANCIAL ASSETS (Continued)

b. Bank Guarantees / SBLC (Continued)

The Company should provide the bank guarantee (SBLC) for gas supplies equivalent to approximately

two month’s consumption value and the balance of gas through Deutsche Bank, Jakarta for an amount

equal to US$ 3,550,976 plus Rp 9,900,000,000 (equivalent to US$ 4,287,802) in 2016 and

US$ 5,839,695 plus Rp 16,498,800,000 (equivalent to US$ 7,035,694) in 2015 representing

two (2) month’s consumption. The bank guarantees still have terms of eight (8) months after the

reporting date and will due on August 31, 2017. In order to obtain the SBLC, the Company deposited

an amount equal to US$ 5,381,655 as of December 31, 2016 and 2015, respectively, in Deutsche Bank,

Hong Kong as collateral through Kyoa account. The collateral represents approximately 120% of

SBLC amount for Rupiah portion.

Due to the short-term nature of other current financial assets, their carrying amount approximates their fair

values.

The details of other current financial assets based on currencies are as follows:

2 0 1 6 2 0 1 5

US$ US$


Rupiah

(Rp 6,120,998,946 in 2016 and Rp 5,941,270,183 in 2015) 455,567 430,682

Total 5,906,060 5,969,375

No other current financial assets are placed with related parties.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of other

current financial assets is disclosed in Note 48.

9. INVENTORIES

2 0 1 6 2 0 1 5

US$ US$

Finished goods 25,972,215 27,267,217

Work in process 3,707,551 5,479,938

Raw materials 9,859,792 8,335,248

Indirect materials 20,315,942 20,204,878

Total 59,855,500 61,287,281

Less : Allowance for impairment - net (164,050 ) (122,685 )

Net 59,691,450 61,164,596





53

9. INVENTORIES (Continued)

Movement in the allowance for inventory write-down are as follow:

2 0 1 6 2 0 1 5

US$ US$

Beginning balance 122,685 175,732

Movement during the period:

Addition 41,365 –

Deduction – (53,047 )

Ending balance 164,050 122,685

Based on the review of the physical condition of the inventories at the end of each year, the management

believes that allowance for inventory write-down provided is adequate. The impairment of inventory

write-down for the year ended December 31, 2016 is amounting to US$ 41,365, and were recorded as part

of Cost of Goods Sold accounts in the consolidated statements of profit or loss and other comprehensive

income (Note 36). Total amount reversal of inventory write-down for the year ended December 31, 2015

is amounting to US$ 53,047.

As at December 31, 2016, the inventories are covered by a throughput policy issued by PT Asuransi

Indrapura covering fire loss and other risks of inventories totaling US$ 76,500,000. The management

believes that the insurance coverage is adequate to cover losses arising from such risks.

The inventories amounted to US$ 60,200,000 in 2016 and 2015, respectively, are used as collateral for the

Company’s bank loans that were received from Damiano Investments BV., Netherland (Note 18).

10. PURCHASE ADVANCES

2 0 1 6 2 0 1 5

US$ US$

Third parties:

Purchase of material and operational 1,332,483 1,165,105

Purchase of property, plant and equipments 997,639 4,911,812

Total 2,330,122 6,076,917

In 2016, total purchases advance of property, plant and equipments of US$ 997,639 (equivalent to

Rp 13,336,203,318) represents the balance in connection with the purchases of machineries and

equipments with total amounts of US$ 873,258 (equivalent to Rp 11,657,746,038) in filament yarn division

and the purchases of fiber machineries and equipments for expansion with total amounts of

US$ 124,381 (equivalent to Rp 1,678,457,280). The machineries and equipments will be received in 2017.





54

10. PURCHASE ADVANCES (Continued)

In 2015, total purchases advance of property, plant and equipments of US$ 4,911,812 (equivalent to

Rp 67,587,573,440) represents the balance in connection with the purchases of machineries and

equipments with total amounts of US$ 3,184,188 (equivalent to Rp 43,925,873,460) in filament yarn

division and the purchases of fiber machineries and equipments for expansion with total amounts of

US$ 1,727,624 (equivalent to Rp 23,701,141,852). The machineries and equipments will be received in 2016.

The payment made by the Company to PT Texmaco Jaya Tbk (under bankruptcy) in excess of the payment for

tolling expenses and was treated as advance payment for tolling expense in the next month.

11. PREPAID EXPENSES

2 0 1 6 2 0 1 5

US$ US$

Prepaid insurance premium 1,155,534 1,963,586

Prepaid rent 673,125 165,357

Total 1,828,659 2,128,943

12. NON-TRADE RECEIVABLES


2 0 1 6 2 0 1 5

US$ US$

Third party:

PT Multikarsa Investama 45,128,440 44,586,653

Related parties:

PT Texmaco Jaya Tbk (under bankruptcy) 106,408,575 106,408,631

151,537,015 150,995,284


Total 39,574,362 39,032,631

Non-trade receivables from PT Multikarsa Investama represent the cash receipts from AR International

Limited, Hong Kong of Rp 51,421,394,625 (equivalent to US$ 3,827,136 in 2016) and Rp 51,421,394,625

(equivalent to US$ 3,727,539 in 2015) for the refund on the Company’s advances for the purchase of

property, plant and equipment (machinery and equipment). The remaining balance of US$ 41,301,304 and

US$ 40,859,114, respectively as of December 31, 2016 and 2015 represents advance payments for salary

and other expenses.





55

12. NON-TRADE RECEIVABLES (Continued)

Changes in the allowance for impairment are as follows:

2 0 1 6 2 0 1 5

US$ US$


Movement during the period:

Addition – –

Deduction – –

Ending balance 111,962,653 111,962,653

Based on the review of the status of the non-trade receivables, management believes that the carrying value

is a reasonable approximation of fair value. As of December 31, 2016, the allowance for impairment of

remaining balance of PT Multikarsa Investama amounting to US$ 39,574,362 was not provided and this

will be addressed when APF debt restructuring is done and the settlement of the non-trade receivables will

be done when the debt restructuring is completed. Further, management believes that the remaining

balance of non-trade receivables are collectible in the future.

The details of non-trade receivables based on currencies are as follows:

2 0 1 6 2 0 1 5

US$ US$


Rupiah

(Rp 606,345,726,749 in 2016 and

Rp 625,043,781,849 in 2015) 45,128,440 44,586,653

Total 151,537,015 150,995,284

The maximum exposure to credit risk at the reporting date is the carrying value of each class of non-trade

receivables from related parties is disclosed in Note 48.





56

13. OTHER NON-CURRENT FINANCIAL ASSETS

2 0 1 6 2 0 1 5

US$ US$

Restricted Cash In Banks:

IBRA (PPA):

PT Bank Dharmala


PT Bank Putera Multikarsa



PT Bank Papan Sejahtera


PT Bank Umum Nasional


PT Bank Asia Pacific

Rupiah account 41 40

Total 998,945 991,274

As the Company and its Subsidiaries are under restructuring process with the Indonesian Bank

Restructuring Agency (IBRA), the aggregate balances of cash in banks were restricted by IBRA.

The Indonesian government through the Indonesian Bank Restructuring Agency (IBRA) suspended the

bank operating licences of PT Bank Putera Multikarsa, a related party, on January 28, 2000; PT Bank

Dharmala, PT Bank Asia Pacific and PT Bank Papan Sejahtera on March 13, 1999; and PT Bank Umum

Nasional on August 21, 1998. As a result, the balance of banks as of December 31, 2016 and 2015

amounting to US$ 998,945 and US$ 991,274, respectively, is shown as other non-current financial assets

in the consolidated statements of financial position.

The Company and its Subsidiaries’ management determined that the restricted cash in banks do not need

impaired, because the outstanding balance of restricted cash in banks will be settled upon loan repayment

or upon completion of the restructuring program with the creditors and PPA. The net carrying value of

restricted cash in banks is considered a reasonable approximation of fair value.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of other non-

current financial assets is disclosed in Note 48.





57

14. PROPERTY, PLANT AND EQUIPMENT

The details of property, plant and equipment are as follows:

2 0 1 6 2 0 1 5

US$ US$

Direct acquisition:

Carrying cost 1,772,845,331 1,763,386,055

Accumulated depreciation (1,713,765,001 ) (1,709,106,418 )

Book value 59,080,330 54,279,637

Construction in progress 10,566,710 7,596,445

Total 69,647,040 61,876,082

Direct acquisition:

2 0 1 6 Changes during the current period

Beginning Addition Deduction Reclassification Ending

US$ US$ US$ US$ US$

Carrying cost:

Land 15,529,702 – – – 15,529,702

Building and improvement 46,478,745 – – 1,913,481 48,392,226

Machinery and equipment 1,693,117,182 5,797,603 (318,891 ) 1,717,957 1,700,313,851

Transportation equipment 5,352,293 487,352 (153,030 ) – 5,686,615

Office equipment 2,908,133 14,804 – – 2,922,937

1,763,386,055 6,299,759 (471,921 ) 3,631,438 1,772,845,331

Accumulated depreciation:

Building and improvement 45,499,526 465,926 – – 45,965,452

Machinery and equipment 1,655,553,738 4,187,055 – – 1,659,740,793

Transportation equipment 5,179,103 126,973 (133,925 ) – 5,172,151


1,709,106,418 4,792,508 (133,925 ) – 1,713,765,001

Book value 54,279,637 59,080,330





58

14. PROPERTY, PLANT AND EQUIPMENT (Continued)

Direct acquisition: (Continued)



US$ US$ US$ US$ US$

Carrying cost:

Land 15,529,702 – – – 15,529,702

Building and improvement 46,405,523 73,222 – – 46,478,745

Machinery and equipment 1,685,377,311 837,017 – 6,902,854 1,693,117,182

Transportation equipment 5,337,453 14,840 – – 5,352,293


1,755,552,512 930,689 – 6,902,854 1,763,386,055

Accumulated depreciation:

Building and improvement 43,858,059 1,641,467 – – 45,499,526

Machinery and equipment 1,651,368,901 4,184,837 – – 1,655,553,738

Transportation equipment 5,073,718 105,385 – – 5,179,103


1,703,166,009 5,940,409 – – 1,709,106,418

Book value 52,386,503 54,279,637

Construction in progress:



US$ US$ US$ US$ US$

Carrying cost:

Machinery and equipment 7,596,445 6,710,297 (108,594 ) (3,631,438 ) 10,566,710



US$ US$ US$ US$ US$

Carrying cost:

Machinery and equipment 8,979,361 5,519,938 – (6,902,854 ) 7,596,445

2 0 1 6 2 0 1 5

US$ US$

Depreciation expenses is allocated to:

Direct acquisition:

Manufacturing expense (Note 37) 4,652,987 5,826,304

General and administrative expenses (Note 39) 139,521 114,105

Total 4,792,508 5,940,409

The Company own several pieces of land located in Karawang and Kendal amounted to 755,071 square

meters with certificate Building Use Right (Hak Guna Bangunan or HGB) for a period of 20 – 30 years

which will be expired between 2006 and 2044. In 2007, the Company has extended the ownership

certificate of the land were located in Semarang of 78,111 square meters up to November 29, 2027.





59


And in 2014, the Company has also extended the ownership certificate of the land were located in

Karawang of 319,755 square meters up to May 3, 2034. Management believes that there will be no

difficulty in the extension of the certificate of landrights since all the landrights were acquired legally and

supported by sufficient evidence of ownership.

The part of the Company’s land in Karawang, with the certificate Building Use Right (HGB) No. 13

of 33,630 square meters and with the certificate Building Use Right (HGB) No. 14 of 35,380 square

meters, are pledged to PT Bank Negara Indonesia (BNI) and PT Bina Prima Perdana (BPP) towards

secured debts’ PT Texmaco Jaya Tbk (in bankruptcy) (Note 44).

During the year 2015, the additions to vehicles represent cars provided to employees through “Retention

Scheme”.

In March 31, 2014, the part of Company’s building and machinery with total acquisition cost of

US$ 43,287,851 and total accumulated depreciation of US$ 43,065,198 were affected fully by fire

accident. The book value of the assets of US$ 222,653 was adjusted against the insurance claim settlement,

net (Note 33). As of December 31, 2016, the Company has received a total claim of US$ 9,782,275 from

the insurance company.

As of December 31, 2016, the construction in progress for machinery and equipment of US$ 10,566,710

consist of the remaining balance in the construction in progress for machinery and equipment in 2015 with

totaling of US$ 4,462,642, the addition during the year 2016 with totaling of US$ 4,462,642, and deduction

during the year 2016 with totaling of US$ 1,385,784 are connected with the capitalization of PTA’s

machineries. Up to December 31, 2016, the total percentage of completion for this project is approximately

80% and will be completed in 2017. Management believes that there is no impediment to the completion

of the construction in progress.

As of December 31, 2015, the construction in progress for machinery and equipment of US$ 7,596,445

consist of the remaining balance in the construction in progress for machinery and equipment in 2015 with

totaling of US$ 8,979,361, the addition during the year 2015 with totaling of US$ 5,519,938, and deduction

during the year 2015 with totaling of US$ 6,902,854 are connected with the capitalization of PTA’s

machineries. Up to December 31, 2015, the total percentage of completion for this project is approximately

80% and will be completed in 2016. Management believes that there is no impediment to the completion

of the construction in progress.

In November 2014, the Company has purchased a Gas Turbine for US$ 4,217,940 from the curator of

PT Wismakarya Prasetya on a public auction.

Management believes that the estimated recoverable amounts of property, plant and equipment exceed

their carrying values and, hence, no impairment of property, plant and equipment should be recorded as at

the statement of financial position date.

In 2016, The fair value of land (836,457 sqm) based on NJOP (Tax Object Market Value) is

Rp 415,285,004,000 (equivalent to US$ 30,908,381) and the fair value of building (244,682 sqm) based

on NJOP is Rp 176,430,390.000 (US$ 13,131,169).





60


Based in the appraisal’s report of KJPP Nirboyo A., Dewi A. & Rekan dated November 18, 2016, total

market value of the Company’s property, plant and equipment were US$ 434,245,310 with the liquidation

value of US$ 281,855,681.

The valuation, which conforms to International Valuation Standards, was determined by reference to

recent market transactions on arm’s length terms. Appraisal method used is Market Data Approach

Methods. Elements used in data comparison process to determine assets’ fair value are as follows:

a. Type of right on property.

b. Market condition

c. Location

d. Land and Physical characteristics

e. Income producing characteristics

As of December 31, 2016 and 2015, total acquisition cost of fully depreciated property, plant and

equipment is amounted to US$ 7,345,358 and US$ 33,220,848, respectively, but the Company is still using

these assets in their operations.

All of the Company’s property, plant and equipment, except land were insured with PT Fairfax Insurance

Indonesia as lead Insurance Company from loss and other risks including earthquake valuing in total

US$ 459,500,000 as of December 31, 2016 (valid up to December 31, 2017) and US$ 609,500,000 as of

December 31, 2015 (valid up to December 31, 2016), respectively. The Company’s management, the sum

insured as stated above is adequate to cover possible losses arising from risks covered.

Most of Company’s land, building, machinery and equipments are used as collateral for secured bond

holders from PT Bina Prima Perdana (BPP)/PT Perusahaan Pengelola Asset (PPA) (Note 19). The

machinery and equipment under Batch Poly Project (excluding civil work), Fiber Line, and Automotive

Project with EFK machine totaling of US$ 17,700,000 in 2016 and 2015, respectively, are used as

collateral for the Third Loans from Damiano Investments BV., Netherland (Note 21).

15. INTANGIBLE ASSETS

2 0 1 6 2 0 1 5

US$ US$

Legal processing of landrights 125,428 125,428

Less: accumulated amortization (18,112 ) (11,838 )

Net 107,316 113,590

Amortization expense are allocated to:

General and administrative expenses (Note 39) 6,272 6,274





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15. INTANGIBLE ASSETS (Continued)

Intangible assets represent legal cost associated with the acquisition of landrights for land located at

Bandung (166 square meters) and the acquisition of landrights for land located in Karawang

(319,755 square meters). These are amortized over the useful life (Hak Guna Bangunan) of 20 years.

As of December 31, 2016 and 2015, the management believes that there was no indication of impairment

for intangible assets.

16. TRADE PAYABLES

This account consist of:

Third parties:

2 0 1 6 2 0 1 5

US$ US$

Local suppliers 5,875,231 7,069,347

Foreign suppliers 6,111,482 5,172,511

Total 11,986,713 12,241,858

A summary of the aging of trade payables to third parties based on the date of invoice is as follows:

2 0 1 6 2 0 1 5

US$ US$

Up to 1 month 8,239,683 7,721,483

> 1 month – 3 months 2,592,292 3,280,818

> 3 months – 6 months 774,345 944,774

> more than 6 months 380,393 294,783

Total 11,986,713 12,241,858

The details of trade payables to third parties based on currencies are as follows:

2 0 1 6 2 0 1 5

US$ US$


Rupiah

(Rp 74,463,024,065 in 2016 and

Rp 73,779,315,675 in 2015) 5,542,047 5,348,265

European Euro

(EUR 291,553 in 2016 and

EUR 515,773 in 2015) 307,286 563,432

Carried forward 11,935,027 12,197,884





62

16. TRADE PAYABLES (Continued)

The details of trade payables to third parties based on currencies are as follow: (Continued)

2 0 1 6 2 0 1 5

US$ US$

Brought forward 11,935,027 12,197,884

Japan Yen

(Yen 4,419,000 in 2016 and

Yen 3,742,080.00 in 2015) 37,955 31,066

Singapore Dolar

(SGD 640 in 2015) − 452

Swiss Franc

(CHF 14,000 in 2016 and

CHF 12,316 in 2015) 13,731 12,456

Total 11,986,713 12,241,858

Trade payables to local and foreign suppliers represent payables for purchase of raw materials and indirect

materials. These are non-interest bearing with clear terms of repayment.

Due to their short-term nature, their carrying amount of trade payables approximates their fair value.

There is no guarantee given on the trade payables.

17. ACCRUED EXPENSES

2 0 1 6 2 0 1 5

US$ US$

Interest 42,996,909 42,273,864

Electricity and gas 12,239,781 6,145,488

Insurance 561,736 735,711

Transportation 560,857 656,011

Professional fee 95,322 92,996

Rent 81,672 81,699

Others 381,609 460,872

Total 56,917,886 50,446,641

The part of accrued interest amounted to Rp 380,648,007,290 (equivalent to US$ 28,330,456) in 2016 and

Rp 380,648,007,289 (equivalent to US$ 27,593,186) in 2015 represent the interest expenses accrued from

secured debt since the year 2001 and 2002, while all the unpaid and accrued interest up to year 2000

according to the DMOA had been waived. The interest expense after the year 2002 has not been recorded

by the Company due to the restructuring process that has not yet been completed (Note 19).





63

17. ACCRUED EXPENSES (Continued)

The details of accrued expenses based on currencies are as follows:

2 0 1 6 2 0 1 5

US$ US$

Rupiah

(Rp 548,908,523,763 in 2016 and

Rp 479,395,011,200 in 2015) 40,853,567 34,751,360


Total 56,917,886 50,446,641

Due to their short-term nature, their carrying amount of accrued expenses approximates their fair value.

18. BANK LOANS

2 0 1 6 2 0 1 5

US$ US$

Related Party:

Damiano Investment BV., Netherland 85,729,859 88,135,716

According to the loan agreement dated March 3, 2006 and its amendment dated August 31, 2006 between

the Company (Borrower), and Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson

(Monitoring Agent), the lender agreed to provide the Letter of Credit facility in the aggregate principal

amount of US$ 50,000,000. Accordingly, the Company can also use the lender name as guarantor for

opening Letter of Credit in Barclays Bank Plc, Hong Kong (Barclays). In addition, the Company should

pay a financing fee of 2.25% per month on the aggregate amounts of the facility in Barclays to Damiano

Investments BV., Netherland.

Based on the amendment loan agreement dated January 1, 2009 between the Company (Borrower), and

Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), from

April 3, 2009 onwards, any and all references to “Barclays Letter of Credit Facility” shall be moved to

“Deutsche Bank AG: Letter of Credit Facility”. The fee charges by Damiano Investments BV., Netherland

on this facility was 1.25% per month.

The Letter of Credit facility always changed based on the Company’s requirements for purchasing of raw

materials. Based on the recent amendment loan agreement dated April 8, 2011 between the Company

(Borrower) and Damiano Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring

Agent), the lender agreed to increase the Letter of Credit facility in the aggregate principal amount from

US$ 50,000,000 to US$ 80,000,000.

Based on the amendment loan agreement on July 2012 between the Company (Borrower) and Damiano

Investments BV., Netherland (Lender), and PT Ferrier Hodgson (Monitoring Agent), the lender agreed to

increase the Letter of Credit facility in the aggregate principal amount from US$ 80,000,000 to

US$ 100,000,000.





64

18. BANK LOANS (Continued)

Further, based on recent amendment loan agreement on January 1, 2014 between the Company (Borrower)

and Damiano Investments BV., Netherland (Lender), and PT Pilot Asia Capital (formerly known as

PT Ferrier Hodgson) (Monitoring Agent), the lender agreed to change the financing fee from 15.00% per

annum to 12.50% per annum. The tenure of the letter of credit facility has been extended by 2 (two) more

years effective from August 2014 by means of Fourth Amendment Agreement between Damiano

Investments BV., Netherland and the Company.

The availability of facility as of December 31, 2016 and 2015 was US$ 94,630,740 and US$ 92,003,634,

respectively. And the letter of credit is used by the Company to purchase of raw materials totaling

US$ 85,729,859 in 2016 and US$ 88,135,716 in 2015, respectively. This is a revolving facility.

For the year ended December 31, 2016, the interest fee on Bank Loan has been waived by Damiano

Investments BV., Netherland as per amendment agreement dated January 2, 2016.

For the year ended December 31, 2015, the interest fee on bank loan of 6% for the period between

January 1, 2015 to September 30, 2015 has been recognized in the amount of US$ 3,645,178 and is

presented as part of finance costs accounts in the consolidated statements of profit or loss and other

comprehensive income (Note 40). And for the period October 1, 2015 to December 31, 2015, the interest

fee on Bank Loan has been waived by Damiano Investments BV., Netherland as per amendment agreement

dated January 2, 2015.

In 2016, the letter of credit facility is secured by fiduciary transfers of inventories and receivables valuing

US$ 60,200,000 and US$ 45,000,000, respectively (Notes 6 and 9).

Due to their short-term nature, their carrying amount of bank loans approximates their fair value.

19. SECURED DEBTS 2 0 1 6 2 0 1 5

US$ US$

Bonds:

13% Guaranteed Secured Notes 122,526,000 122,526,000

Secured Floating Rate Notes 50,000,000 50,000,000

9.375% Guaranteed Secured Notes 250,000,000 250,000,000

11.375% Guaranteed Secured Notes 260,000,000 260,000,000

682,526,000 682,526,000

PT Bina Prima Perdana


IDR 1,302,583,907,331 96,947,299 94,424,350

USD 29,055,834 29,055,834

YEN 3,001,711,400 25,781,296 24,919,797

EUR 849,872 895,765 928,401

152,680,194 149,328,382





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19. SECURED DEBTS (Continued)

2 0 1 6 2 0 1 5

US$ US$

Ex – Banks – Billateral Loans:

Damiano Investments BV., Netherland

(Ex. Credit Agricole Indosuez, Singapore) 12,117,088 12,117,088


(Ex. PT Bank Finconesia)

EUR 7,471,539 7,875,005 8,161,918


(Ex. Union Europeene de CIC, Singapore)

EUR 5,941,395 6,262,233 6,490,387


(Ex. Bangkok Bank, Singapore) 1,303,097 1,303,097

Kyoa Investment Limited, British Virgin Island

(Ex. Bangkok Bank, Singapore) 500,000 500,000

Sverige Financing Limited, British Virgin Island


Sasando Pte. Ltd., Singapore


Sverige Netherlands B.V., Netherland


Others 490,400 490,400

29,557,423 30,072,490





66


2 0 1 6 2 0 1 5

US$ US$

Ministry of Finance (Ex. BNI LC):



Rupiah

(Rp 38,468,048,072 in 2016 and 2015) 2,863,059 2,788,549

83,229,517 83,155,007

Total 947,993,134 945,081,879

On November 30, 2001, the Company entered into Definitive Memorandum of Agreement (DMOA) with

the noteholders regarding the restructuring plan of the Company. However, it has not yet been executed

by the Company and the DMOA and automatically terminated. On March 14, 2007 and July 2007, the

Company has issued a new Secured Debt Restructure Proposal (SDRP) to its secured creditors for the

restructure of its Secured debts including the bonds, but the approval from the secured creditors,

particularly from PPA (approximately of 26% of total secured debt) has not given. Since no restructure

agreement has been reached between the Company and the secured creditors, the secured debts continue

to remain overdue.

In November 2010 and December 2010, PPA announced a “Sale of Texmaco Assets and Shares”

programme which includes the fixed assets held as security by PPA in the Company-Semarang’s site.

However for some reasons, the programme was later called off and cancelled.

Damiano Investments BV., Netherland currently hold approximately 93% of the secured bonds and ex.

banks are willing to approve the new Secured Debt Restructure Proposal. In February 2014, the Company

has submitted a revised Secured Debt Restructuring Plan (SDRP) to PPA (Note 2a) in line with the current

business trend and the sustainability of debts. According to the Revised Proposal, the secured debt will be

converted into a retained debt of US$ 80 million and the balance converted into equity. The new debt is

repayable over 8 years. The existing equity will be diluted by 45.10% by issuance of 54.90% of new equity

which will be issued to the secured creditors for swapping the debt.

The Company has also submitted had submitted an updated Secured Debt Restructuring proposal to the

Committee and the MoF during October 2016. Until March 2017, no response has been received. However,

the SDRP is under active consideration of all the secured creditors.





67


A. 13% Guaranteed Secured Notes, US$ 122,526,000.

The Company issued US$ 125,000,000 Unsecured Senior Notes in June 1994 carrying an interest rate

of 13% per annum. The notes are due for repayment in 2001. In May 1996, the Company offered to

the holders of the said unsecured notes to exchange their notes with 13% Guaranteed Senior Notes due

in 2001 which were listed in Luxembourg Stock Exchanges and issued by PIFC with the Company as

the guarantor. All holders of the unsecured notes exchanged their notes with the new secured notes

except for the holders of unsecured notes amounting to US$ 2,474,000. In August 1997, the Company

paid part of the 13% Unsecured Senior Notes amounting to US$ 1,250,000.

B. Secured Floating Rates Notes, US$ 50,000,000.

In February 1996, PIFC, with the Company as a guarantor, issued the US$ 50,000,000 Secured

Floating Rate Notes which were listed in Luxembourg Stock Exchanges with carrying an interest rate

of 3% above LIBOR and were due in 1999.

C. 9.375% Guaranteed Secured Notes, US$ 250,000,000.

In July 1997, PIFC, with the Company as a guarantor, issued the US$ 250,000,000 Guaranteed

Secured Notes due in 2007 which were listed in Luxembourg Stock Exchange with carrying an interest

rate of 9.375% per annum. The proceeds from issuance of these notes were used to finance a portion

of phase I of the Company’s expansion program.

D. 11.375% Guaranteed Secured Notes, US$ 260,000,000.

In June 1996, PIFC, with the Company as a guarantor, issued the US$ 260,000,000 Guaranteed

Secured Notes due in 2006 which were listed in Luxembourg Stock Exchange. The notes carry an

interest rate of 11.375% per annum. The proceeds from issuance of these notes were used to pay off

other debts and loans.

Currently all these notes have been delisted from Luxembourg Stock Exchanges and are secured by liens

of the collateral, which consist of real property, moveable assets (other than inventories) and proceeds of

collateral on a pari-passu basis with the other notes payable and obligations of the Company (Note 14).

Of the total Secured Bonds of US$ 682,526,000, Damiano Investments BV., Netherland is holding around

US$ 631,000,000 (92.5%).

Loans to PT Bina Prima Perdana (BPP) represent loans from PT Bank Negara Indonesia (Persero) Tbk

which had been defaulted and transferred to IBRA. Further, pursuant to debt restructuring scheme in

Master Restructuring Agreement (MRA) dated May 23, 2001, in 2002 the Company’s debts to IBRA have

been transferred to BPP. For this transfer, BPP issued Exchangeable Bond (EB) to IBRA. But,

on February 26, 2004, IBRA issued a letter of default notice to PT Bina Prima Perdana. The letter stated

that PT Bina Prima Perdana as the textile holding company had failed to pay the Exchangeable Bond (EB)

coupons due on August 18, 2003.





68


The Company did not recognize the interest expenses on secured debts since 2002 since the Company is

under restructuring process, and the interest payable will not be counted. As of December 31, 2016

and 2015, the Company had interest payable of Rp 380,648,007,290 (equivalent to US$ 28,330,456 in

2016 and US$ 27,593,186 in 2015) and was presented as part of accrued expenses in the consolidated

statements of financial position (Note 17).

Based on the Deed of Debt Assignment dated June 11, 2014, Damiano Investments BV., Netherland agree

to assigns rights, title and interest of Company’s secured debts to Kyoa Investment Limited, Sverige

Financing Limited, Sverige Netherland BV. and Sasando Pte. Ltd. in the proportion set out below:

Creditors

Principal Amount

Outstanding of Debts

Purchased

Purchase Consideration

Damiano Investments BV. US$ 1,303,097.37 Seller is retained a portion

of the outstanding Debts

Kyoa Investment Limited US$ 500,000.00 US$ 50,000.00

Sverige Financing Limited US$ 500,000.00 US$ 50,000.00

Sverige Netherland BV. US$ 500,000.00 US$ 50,000.00

Sasando Pte. Ltd. US$ 500,000.00 US$ 50,000.00

Total US$ 3,303,097.37 US$ 200,000.00

Futher, based on the Transfer Certificate dated April 30, 2015, Sverige Financing Limited agree to transfer

the principal and interest on secured debt amounted US$ 490,400 to some people, and hold for itself

amounted US$ 9,600. Then, the proportion of Company’s secured debts are shown as below:

Creditors

Principal Amount

Outstanding of Debts

purchased

Purchase Consideration

Damiano Investments BV. US$ 1,303,097.37 Seller is retained a portion

of the outstanding Debts

Kyoa Investment Limited US$ 500,000.00 US$ 50,000.00

Sverige Netherland BV. US$ 500,000.00 US$ 50,000.00

Sasando Pte. Ltd. US$ 500,000.00 US$ 50,000.00

Sverige Financing Limited US$ 9,600.00 US$ 50,000.00

Others US$ 490,400.00

Total US$ 3,303,097.37 US$ 200,000.00





69


As consequently, the Company should be paid in respect of the Purchase Debt to each of the creditors

above in accordance with the proportion of the Purchase Debt owned by each creditor as stated at the above

table.

The breakdown of secured debts by currency is as follows:

2 0 1 6 2 0 1 5

US$ US$


European Euro

(EUR 14,262,806 in 2016 and 2015) 15,033,003 15,580,706

Japan Yen

(JPY 3,001,711,400 in 2016 and 2015) 25,781,296 24,919,797

Rupiah

(Rp 1,341,051,955,403 in 2016 and 2015) 99,810,358 97,212,898

Total 947,993,134 945,081,879

Due to their short-term nature, their carrying amount of secured debts approximates their fair value.

20. UNSECURED DEBTS AND NOTES PAYABLE

2 0 1 6 2 0 1 5

US$ US$

Madison Pacific Trust Limited 25,024,969 −

The Hongkong and Shanghai Banking Corporation Limited − 24,032,636

The Company has taking steps to implement the Composition Plan (Peace Plan) as approved by the

unsecured creditors of the Company and ratified by the Commercial Court. On September 29, 2006, the

unsecured creditors comprising of Banks, PT Bina Prima Perdana, Leasing, and Notes stand at

US$ 18,670,630 was restructured into Fixed Rate Notes under custodian of The Hongkong and Shanghai

Banking Corporation Limited, Hong Kong.

As of December 31, 2016 and 2015, the total restructured unsecured debts and notes payable were

US$ 25,024,969 and US$ 24,032,636, respectively, which comprising of principal notes at

US$ 18,670,630 plus unpaid capitalized interest of US$ 6,354,339 in 2016 and US$ 5,362,006 in 2015.

Based on the Minutes of Noteholders’ Meeting between the Company (Borrower) and the majority

unsecured creditors dated January 16, 2012, the Noteholder shall defer the redemption dated of the

unsecured debt and notes payable for 3 (three) years by revoking and replacing the table of redemption

dates below:





70

20. UNSECURED DEBTS AND NOTES PAYABLE (Continued)

Years Amortizations

2015 5.00%

2016 17.50%

2017 17.50%

2018 17.50%

2019 20.00%

2020 22.50%

Further, based on the Minutes of Noteholders’ Meeting between the Company (Borrower) and the majority

unsecured creditors dated January 21, 2015, the Noteholder shall defer the redemption dated of the

unsecured debt and notes payable for 3 (three) years by revoking and replacing the table of redemption

dates below:

Years Amortizations

2018 5.00%

2019 17.50%

2020 17.50%

2021 17.50%

2022 20.00%

2023 22.50%

All unsecured debts and notes payable are denominated in US Dollar.

Based on the Deed of Novation and Accession dated April 28, 2016 between the Company, Damiano

Investments, BV., Netherlands, Deutsche Bank AG, PT Pilot Asia Capital, The Hongkong and Shanghai

Banking Corporation Limited, and Madison Pacific Trust Limited, the parties agreed to changed the Fiscal

Agency services of Unsecured New Notes from The Hongkong and Shanghai Banking Corporation

Limited to Madison Pacific Trust Limited.

For the years ended December 31, 2016 and 2015, the interest charges on the unsecured debts were

US$ 982,016 and US$ 971,905, respectively, and are presented as part of finance costs accounts in the

consolidated statements of profit or loss and other comprehensive income (Note 40).

The fair value of long-term financial liabilities have been determined by calculating their present value at

the consolidated statements of financial position date, using fixed effective market interest rates available

to the Company. No fair value changes have been included in consolidated statements of profit or loss and

other comprehensive income for the period as financial liabilities are carried at amortized cost in the

consolidated statements of financial position.

21. WORKING CAPITAL LOANS

2 0 1 6 2 0 1 5

US$ US$

Related Party:

Damiano Investments BV., Netherland 23,570,000 22,070,000





71

21. WORKING CAPITAL LOANS (Continued)

Based on the Working Capital Loan Agreement between the Company and Damiano Investments BV.,

Netherland dated June 1, 2006, Damiano Investments BV., Netherland has provided the working capital

loans facility for the Company. The interest chargeable on this loan is 9% per annum till the

implementation of the Composition Plan. Upon implementation of the Composition Plan, the rate of

interest is as per the terms of the “New Notes / Loan restructure”. The working capital loan shall be

repayable on the earlier of 5 (five) years from the date of this agreement.

Based on the second amendment of working capital loan agreement dated June 1, 2011, the repayment

date has been extended from 5 (five) years to be 7 (seven) years.

Based on the third amendment of third working capital loan agreement dated August 1, 2013, the

repayment date has been re-extended from 7 (seven) years to be 9 (nine) years.

Based on the fourth amendment of third working capital loan agreement dated June 1, 2015, the repayment

date has been re-extended from 9 (nine) years to be 11 (eleven) years. The management informed that the

loan will be extended by 2 (two) more years when it expires by June 2017.

Third Loan:

During the year 2011, Damiano Investments BV., Netherland has provided US$ 8,500,000 as part of the

Company’s capital expenditure. The part of these working capital loans of US$ 4,100,000 have been repaid

by the Company in 2012, while the remaining balance of US$ 4,400,000 is still outstanding as of

December 31, 2016 and 2015.

During the year 2012, Damiano Investments BV., Netherland has also provided US$ 12,940,000 as part

of the Company’s capital expenditure. It was still outstanding as of December 31, 2016 and 2015,

respectively.

This loan is denominated in US Dollar. The loan is secured by fiduciary transfer of certain assets in

Karawang and Semarang for a value of US$ 17,700,000 (Note 14).

During the year 2016, Damiano Investments BV., Netherland has also provided US$ 1,000,000 in

September 2016 and US$ 500,000 in November 2016 as part of the Company’s capital expenditure. It was

still outstanding as of December 31, 2016.

Fourth Loan:

Based on the Fourth Loan Agreement between the Company and Damiano Investments BV., Netherland

dated November 5, 2014, Damiano Investments BV., Netherland agree to provide a loan facility for the

Company with totaling of US$ 4,750,000. The interest chargeable on this loan is 6% per annum since the

first anniversary of the first drawdown date, and shall be repayable on the earlier of 5 (five) years from the

date of this agreement. This loan is used for the purpose of purchase of Gas Turbine (ABB) on a public

auction from the curator of PT Wismakarya Prasetya.





72

21. WORKING CAPITAL LOANS (Continued)

Further based on the drawdown notice dated November 5, 2014 and November 14, 2014, the Company

has receipt the part of fourth loan facility with totaling of US$ 4,730,000. These drawdown are used for

purchasing of 1 (one) of gas turbine from PT Wismakarya Prasetya.

For the years ended December 31, 2016 and 2015, the interest charge on the working capital loans from

Damiano Investments BV., Netherland were US$ 3,244,042 and US$ 2,938,380, respectively, and are

presented as part of finance costs accounts in the consolidated statements of profit or loss and other

comprehensive income (Note 40).






22. CREDIT FINANCING PAYABLES

2 0 1 6 2 0 1 5

US$ US$

Credit financing payable:

PT Andalan Finance Indonesia 3,494 41,281

PT Astra Sedaya Finance 37,575 6,038

PT Toyota Astra Financial Service 28,166 −

PT Mandiri Tunas Finance 40,460 −

Total credit financing payables 109,695 47,319

Less: current maturity of credit financing payable:

PT Andalan Finance Indonesia (3,494 ) (37,879 )

PT Astra Sedaya Finance (11,652 ) (3,500 )

PT Toyota Astra Financial Service (16,857 ) −

PT Mandiri Tunas Finance (9,715 ) −

Total current maturity of credit financing payables (41,718 ) (41,379 )

Credit financing payables – net of current maturity 67,977 5,940

Based on agreement dated September 14, 2013, the Company obtained a credit financing from

PT Astra Sedaya Finance for purchasing of a car (Toyota Innova) amounting to Rp 180,078,500 with

effective interest rate of 10.18% per annum, repayable in monthly installments from September 14, 2013

up to August 14, 2017. As of December 31, 2016 and 2015, the outstanding credit financing payable

balances was Rp 35,017,838 (equivalent to US$ 2,606) and Rp 83,300,564 (equivalent to US$ 6,038),

respectively.





73

22. CREDIT FINANCING PAYABLES (Continued)

Based on agreement dated January 15, 2014, the Company obtained a credit financing from PT Andalan

Finance Indonesia for purchasing of a car (Suzuki Ertiga) amounting to Rp 124,320,000 with effective

interest rate of 9.08% per annum, repayable in monthly installments from January 20, 2014 up to

December 20, 2016. As of December 31, 2016 and 2015, the outstanding credit financing payable balance

were Rp Nil (equivalent to US$ Nil), and Rp 44,919,650 (equivalent to US$ 3,256), respectively.


Finance Indonesia for purchasing of a car (Suzuki Ertiga) amounting to Rp 106,120,000 with effective





Finance Indonesia for purchasing of a car (Toyota Avanza) amounting to Rp 114,520,000 with effective





Finance Indonesia for purchasing of a car (Toyota Avanza) amounting to Rp 114,520,000 with effective




Based on agreement dated January 15, 2014, the Company obtained a credit financing from

PT Andalan Finance Indonesia for purchasing of a car (Toyota Avanza) amounting to Rp 114,520,000

with effective interest rate of 8.72% per annum, repayable in monthly installments from January 20, 2014

up to December 20, 2016. As of December 31, 2016 and 2015, the outstanding credit financing payable

balance were Rp Nil (equivalent to US$ Nil), and Rp 41,250,110 (equivalent to US$ 2,990), respectively.


Finance Indonesia for purchasing of a car (Toyota Rush) amounting to Rp 152,110,000 with effective





Finance Indonesia for purchasing of a car (Toyota Etios) amounting to Rp 111,020,000 with effective








74


Based on agreement dated February 7, 2014, the Company obtained a credit financing from

PT Andalan Finance Indonesia for purchasing of a car (Honda Brio) amounting to Rp 87,500,000 with

effective interest rate of 9.08% per annum, repayable in monthly installments from February 15, 2014 up

to January 15, 2017. As of December 31, 2016 and 2015, the outstanding credit financing payable balance

were Rp 2,745,226 (equivalent to US$ 204), and Rp 34,123,188 (equivalent to 2,474), respectively.

Based on agreement dated January 15, 2014, the Company obtained a credit financing from

PT Andalan Finance Indonesia for purchasing of a car (Kia Picanto) amounting to Rp 92,050,000 with

effective interest rate of 9.09% per annum, repayable in monthly installments from January 20, 2014 up

to December 20, 2016. As of December 31, 2016 and 2015, the outstanding credit financing payable

balance were Rp Nil (equivalent to US$ Nil), and Rp 33,260,597 (equivalent to US$ 2,441), respectively.


PT Andalan Finance Indonesia for purchasing of a car (Toyota Rush) amounting to Rp 146,580,000 with



were Rp 4,587,973 (equivalent to US$ 342), and Rp 57,078,902 (equivalent to US$ 4,138), respectively.


PT Andalan Finance Indonesia for purchasing of a car (Honda Brio) amounting to Rp 87,500,000 with




Based on agreement dated February 7, 2014, the Company obtained a credit financing from PT Andalan

Finance Indonesia for purchasing of a car (Toyota Etios) amounting to Rp 113,400,000 with effective

interest rate of 8.90% per annum, repayable in monthly installments from February 15, 2014 up to

January 15, 2017. As of December 31, 2016 and 2015, the outstanding credit financing payable balance


Based on agreement dated November 25, 2014, the Company obtained a credit financing from

PT Andalan Finance Indonesia for purchasing of a car (Honda Mobilio) amounting to Rp 96,675,000 with

effective interest rate of 14.72% per annum, repayable in monthly installments from January 2, 2015 up

to December 2, 2017. As of December 31, 2016 and 2015, the outstanding credit financing payable balance

was Rp 33,314,469 (equivalent to US$ 2,480) and Rp 68,244,143 (equivalent to US$ 4,947), respectively.

Based on agreement dated April 6, 2016, the Company obtained a credit financing from

PT Astra International Tbk for purchasing of a car (Toyota Innova) amounting to Rp 305,458,400 with

effective interest rate of 10.35% per annum, repayable in monthly installments from April 6, 2016 up to

March 6, 2019. As of December 31, 2016, the outstanding credit financing payable balance was

Rp 237,011,716 (equivalent to US$ 17,640).





75


Based on agreement dated July 20, 2016, the Company obtained a credit financing from

PT Astra Sedaya Finance for purchasing of a car (Toyota Nav) amounting to Rp 277,683,400 with

effective interest rate of 9.95% per annum, repayable in monthly installments from July 20, 2016 up to

June 20, 2019. As of December 31, 2016, the outstanding credit financing payable balance was Rp

236,158,772 (equivalent to US$ 17,577).


PT Astra Sedaya Finance for purchasing of a car (Toyota Camry) amounting to Rp 327,502,000 with


to January 16, 2019. As of December 31, 2016, the outstanding credit financing payable balance was


Based on agreement dated June 14, 2016, the Company obtained a credit financing from

PT Astra International for purchasing of a car (Toyota Innova) amounting to Rp 175,559,640 with

effective interest rate of 5.35% per annum, repayable in monthly installments from June 14, 2016 up to

May 14, 2019. As of December 31, 2016, the outstanding credit financing payable balance was Rp

141,423,043 (equivalent to US$ 10,526).

Based on agreement dated November 8, 2016, the Company obtained a credit financing from

PT Mandiri Tunas Finance for purchasing of two (2) Toyota forklift amounting to Rp 702,000,000 with

effective interest rate of 13% per annum, repayable in monthly installments from March 10, 2017 up to

January 10, 2020. As of December 31, 2016, the outstanding credit financing payable balance was


The interest expenses incurred on this credit financing for the years ended December 31, 2016 and 2015

were Rp 138,574,412 (equivalent to US$ 10,561) and Rp 97,763,488 (equivalent to US$ 7,326),

respectively, and is shown as part of the finance costs accounts in the consolidated statements of profit or

loss and other comprehensive income (Note 40).






23. OTHER SHORT-TERM FINANCIAL LIABILITIES

2 0 1 6 2 0 1 5

US$ US$

Advance receipts from customers 824,082 1,588,953

Freight and transportation 329,376 225,091

Others 4,196,784 3,543,498

Total 5,350,242 5,357,542





76

23. OTHER SHORT-TERM FINANCIAL LIABILITIES (Continued)

The details of other short-term financial liabilities based on currencies are as follows:

2 0 1 6 2 0 1 5

US$ US$

Rupiah

(Rp 29,649,792 in 2016 and

Rp 51,696,644,961 in 2015) 2,206,723 3,752,296


European Euro

(EUR Nil in 2016 and EUR 25,018 in 2015) −

27,329

Total 5,350,242 5,357,542

Due to their short-term nature, their carrying amount of other short-term financial liabilities approximates

their fair value.

24. DEFERRED REVENUE

2 0 1 6 2 0 1 5

US$ US$

Government grant 246,027 246,027

Less: accumulated amortization (46,065 ) (33,501 )

Net 199,962 212,526

Amortization income are allocated to:

Miscellaneous income, net (Note 41) 12,563 12,563

Deferred revenue represents the government grant related to purchase of machinery EFK Multi Spindel

Texturing and EFK Coolflex with totaling of Rp 37,629,356,188 (equivalent to US$ 3,972,862). The

machinery was located at Semarang, Central Java.

The government grant is based on the Letter of Agreement to give the grant for Revitalization Programme

and Industrial Growth through Restructuring of machinery / industry equipment TPT, and also IAK from

the Ministry of Industry No. 0043/BIM.5/SPPB-TL/A/5/2013 dated May 10, 2013, which stated that the

Company obtain the grant for purchasing of machinery amounting to Rp 2,388,181,818 (equivalent to

US$ 246,027). And its government grant will be amortized over the useful life of machinery (20 years).

25. SHORT-TERM EMPLOYEE BENEFIT LIABILITIES

Short-term employee benefit liabilities on December 31, 2016 and 2015 amounting to US$ 532,715 and

US$ 366,276, respectively, are liabilities on bonus for employee, pension, salary, medical, and other

benefit.





77

26. LONG-TERM EMPLOYEE BENEFITS LIABILITIES

On June 20, 2000, the Ministry of Manpower issued Decree No. KEP-150/Men/2000 regarding the

settlement of work dismissal and determination of separation, appreciation and compensation payment to

employees, which requires companies to pay their employees gratuity and compensation benefits in case

of employees resignation based on the employee’s number of years of service and salaries provided the

conditions set forth in the decree are met.

In April 2003, the Government of the Republic Indonesia issued Labour Law No. 13/2003 replacing the

Decree No. KEP-150/Men/2000.

The Company has defined benefit pension plans covering substantially all of their eligible permanent

employees. The balances of long-term employee benefit liabilities as of December 31, 2016 and 2015

amounted of US$ 11,154,807 and US$ 9,759,801, respectively, are calculated by independent actuary

on a yearly basis, as set out in their reports dated March 1, 2017 and March 7, 2016.

The amounts recognized in the consolidated statements of financial position are determined as follows:

2 0 1 6 2 0 1 5

US$ US$

Present value of unfunded benefit obligations 11,154,807 9,759,801

Fair value of plan assets − −

Net liability 11,154,807 9,759,801

The movements in the present value of defined obligation over the year are as follows:

2 0 1 6 2 0 1 5

US$ US$

Present value of defined benefit obligations

at beginning of the period 9,759,801 12,125,149

Current service costs 718,973 638,800

Past service costs 2,311 2,897

Interest costs 873,270 901,349

Actuarial loss (gain) from experience adjustment (209,991 ) (1,256,157 )

Actuarial loss (gain) from change in financial assumptions 598,080 (673,504 )

Benefit paid (848,411 ) (799,327 )

Foreign exchange gain – net 260,774 (1,179,406 )

Present value of defined benefit obligations

at end of the period

11,154,807

9,759,801

As of December 31, 2016 and 2015, all of defined benefit obligation is unfunded obligation so there is no

fair value of plan assets.





78

26. LONG-TERM EMPLOYEE BENEFITS LIABILITIES (Continued)

The amounts recognized in the consolidated statements of profit or loss and other comprehensive income

are as follows:

2 0 1 6 2 0 1 5

US$ US$

Current service cost 718,973 638,800

Interest costs 873,270 901,349

Past service cost 2,311 2,897

Total (Note 39) 1,594,554 1,543,046

The movements in the net liability recognized in the consolidated statements of financial position are as

follows:

2 0 1 6 2 0 1 5

US$ US$

Beginning of the year 9,759,801 12,125,149

Actuarial loss (gain) from experience adjustment (209,991 ) (1,256,157 )

Actuarial loss (gain) from change in financial assumptions 598,080 (673,504 )

Benefits paid (not plan asset) (848,411 ) (799,327 )

Employee benefit expense 1,594,554 1,543,046

Foreign exchange gain 260,774 (1,179,406 )

Total 11,154,807 9,759,801

The cost of providing post-employment benefits is calculated by independent actuary, PT Sienco

Aktuarindo Utama using the following key assumptions:

Discount rate : 8.30% p.a. in 2016 and 9.10% p.a. in 2015

Salary growth rate : 8% p.a. in 2016 and 2015

Mortality rate : Table Mortality in Indonesia 2011

Normal retirement age : 10% in 20 years old and decline until 55 years old

Disability rate : 1% of mortality rate

Fund method : Projected Unit Credit

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with

published statistics and experience in each territory. In Indonesia, the mortality assumptions used are based

on Mortality Table in Indonesia 2011 (“TMI 2011”).

Management reviewed the assumptions used and is of the opinion that the assumptions are reasonable.

Management believes that the provision for severance provided is adequate to cover the potential liability

required by Labour Law No. 13/2003.

The weighted average duration of the Company’s benefits liabilities as of December 31, 2016 is 15 years.





79

26. LONG-TERM EMPLOYEE BENEFITS LIABILITIES (Continued)

Expected maturity analysis of undiscounted pension benefits are as follows:

2 0 1 6

Less than a year 617,395

Between one and two years 411,127

Between two and five years 2,208,775

Between five and ten years 3,754,812

More than ten years 4,162,698

Net profit 11,154,807

The sensitivity of the present value of defined benefit obligation and current service cost to changes in the

weighted principal assumptions of 1% is as follows:

Descriptions

Discount Rate Discount Rate

7.30% 9.30%

US$ % US$ %

December 31, 2016:

Present value of defined obligation 804,407 11.88% 647,510 -9.94%

Current service cost 12,128,777 8.73% 10,301,810 -7.65%

Descriptions

Discount Rate Discount Rate

8.01% 10.01%

US$ % US$ %

December 31, 2015:

Present value of defined obligation 10,582,211 8.43% 9,036,449 -7.41%

Current service cost 688,736 11.14% 561,396 -9.40%

Historical information of present value of experience adjustment on plan liabilities was as follows:

2 0 1 6 2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2

US$ US$ US$ US$ US$

Present value of defined benefit obligation 11,154,807 9,759,801 12,125,149 9,975,563 18,296,212

Fair value of plan assets ─ ─ ─ ─ ─

Deficit in the plan 11,154,807 9,759,801 12,125,149 9,975,563 18,296,212

Experience adjustments on plan liabilities (209,991 ) (1,256,157) 615,393 2,301,812 1,158,683

Experience adjustments on plan assets ─ ─ ─ ─ ─





80

27. TAXATION

a. Prepaid Taxes

2 0 1 6 2 0 1 5

US$ US$

Overpayment of corporate income tax

2014 − 5,426,618

2015 2,908,430 2,908,430

2016 1,292,336 −

Value added Tax 5,977,531 3,084,493

Total 10,178,297 11,419,541

b. Taxes Payable

2 0 1 6 2 0 1 5

US$ US$

Income tax article 21 86,018 88,800



Income tax article 4 (2) 1,765 264

Total 145,695 149,767

c. Corporate Income Tax

A reconciliation between loss before income tax as shown in the consolidated statements of profit or

loss and other comprehensive income and estimated taxable loss which was calculated by the

Company for the years ended December 31, 2016 and 2015 are as follows:

2 0 1 6 2 0 1 5

US$ US$

Loss before income tax as consolidated statements of profit or loss

and other comprehensive income (6,978,741 ) (11,647,345 )

Profit before income tax of the Subsidiaries

Loss before income tax as statements of profit or loss

and other comprehensive income of the Company (6,978,741 ) (11,647,345 )





81

27. TAXATION (Continued)

c. Corporate Income Tax (Continued)

A reconciliation between loss before income tax as shown in the consolidated statements of profit or loss

and other comprehensive income and estimated taxable loss which was calculated by the Company for

the years ended December 31, 2016 and 2015 are as follows: (Continued)

2 0 1 6 2 0 1 5

US$ US$

Fiscal adjustments consisted of:

Permanent difference:

Non deductible expenses (non taxable income):

Income tax article 21 1,090,680 1,089,859

Tax expense 196,116 500,435

Entertainment and representation 118,980 91,736

Donation 119,321 116,373

Interest income (22,498 ) (22,694 )

Gain (loss) on foreign exchange rate, net 36,818,499 (87,186,761 )

38,321,098 (97,058,397 )

Timing differences:

Depreciation expense of property, plant and

equipment (16,829,481 ) (17,703,460 )

Long-term employee benefits liabilities 1,006,917 (493,458 )

Intangible assets (106,802 ) 7,166

Amortization of deferred revenues 12,564 12,563

Amortization of deferred charges (107,152 ) (112,792 )

(16,023,954 ) (18,289,981 )

Estimated taxable profit (loss) for the year before

fiscal loss carry forward 15,318,403 (115,348,378 )

Fiscal loss carry forward (113,021,952 ) (42,731,537 )

Total estimated accumulated taxable loss (97,703,549 ) (158,079,915 )

Estimated corporate income tax

Prepaid taxes:

Income tax article 22 (1,292,336 ) (2,908,430 )

Estimated overpayment of corporate income tax (1,292,336 ) (2,908,430 )

Adjustment on corporate income tax (883,641 ) (1,566,830 )

The Company received and recorded its 2014 yearly corporate income tax return was US$ 5,426,618 in

June 2016. Consequently, the differences between the amount receive against the estimated overpayment

of corporate income tax in the year 2014 is amounted to US$ 883,641 are recorded as part of current income

tax expenses in the statements of profit or loss and other comprehensive income.

The Company has reported the overpayment of corporate income tax for year 2015 amounting to

Rp 38,510,635,000, and the yearly 2015 corporate income tax return was submitted to the tax office

in April 2016. As a consequence, the difference of estimated overpayment for year 2015 amounting to

Rp 58,269,459 (equivalent to US$ 4,378) were recorded as part of corporate income tax in the statement of

profit or loss and other comprehensive income.





82



• Reconciliation the estimated taxable loss between the amounts computed by

functional/presentation currency and taxation purpose for the years ended December 31, 2016 and

2015 are as follows:

December 31, 2016

Tax Reporting

Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$

Loss before income tax as

consolidated statements of profit

or loss and other comprehensive

income

291,250,377,730

−

(6,978,741

)

(6,962,105

)

Profit before income tax of

the Subsidiaries


statements of comprehensive

income of the Company 291,250,377,730 − (6,978,741 ) (6,962,105 )



Non deductible expenses

(non taxable income):

Income tax article 21 14,542,968,575 13,334 1,090,680 1,090,680

Tax expenses 2,627,925,403 13,400 196,116 196,116

Entertainment 1,580,392,170 13,283 118,980 118,980

Donation 1,590,388,175 13,329 119,321 119,321

Interest income (279,863,116 ) 12,439 (22,498 ) (22,498 )

Loss on foreign exchange rate 36,818,493 36,818,493

20,061,811,207 38,321,092 38,321,092

Timing differences:

Depreciation expense of

property, plant and equipment (117,766,711,777 ) 6,998 (16,829,481 ) (16,829,481 )

Long-term employee benefits

liabilities 13,935,945,517 13,840 1,006,917 1,006,917

Amortization of deferred revenue 121,949,710 9,707 12,564 12,564

Intangible assets (1,268,989,738 ) 11882 (106,802 ) (106,802 )

Amortization of deferred charges

(240,322,712

)

2,243

(107,152

)

(107,152

)

(105,218,129,000 ) (16,023,954 ) (16,023,954 )

Estimated taxable profit for the year

before fiscal loss carry forward 206,094,059,937 13,454 15,318,403 15,335,033

Fiscal loss carry forward (1,541,619,431,131 ) 13,640 (113,021,952 ) (113,021,952 )

Total estimated accumulated

taxable loss

(1,335,525,371,194

)

(97,703,549

)

(97,686,919

)





83



December 31, 2016

Tax Reporting

Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$


Prepaid taxes:

Income tax article 22 (30,798,528,472 ) 23,831 (1,292,336 ) (1,292,336 )

Estimated overpayment of

corporate income tax

(30,798,528,472

)

(1,292,336

)

(1,292,336

)

Adjustment on corporate income tax (1,790,481,492 ) (883,641 ) (883,641 )

December 31, 2015

Tax Reporting

Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$


consolidated statements of profit

or loss and other comprehensive

income

(1,462,006,026,072

)

(11,647,345

)

(11,647,345

)

Profit before income tax of

the Subsidiaries


statements of comprehensive

income of the Company (1,462,006,026,072 ) (11,647,345 ) (11,647,345 )



Non deductible expenses

(non taxable income):

Income tax article 21 14,626,970,743 13,421 1,089,859 1,089,859 Tax expenses 6,728,795,302 13,446 500,435 500,435 Entertainment 1,233,606,495 13,447 91,736 91,736 Donation 1,578,096,420 13,561 116,373 116,373 Interest income (305,603,945 ) 13,466 (22,694 ) (22,694 ) Gain on foreign exchange rate (87,186,761 ) (87,186,761 )

23,861,865,015 (85,411,052 ) (85,411,052 )





84



December 31, 2015

Tax Reporting

Currency

Exchange

Rate

Tax Reporting

Currency

Functional

Currency

Rp Rp US$ US$

Timing differences:


property, plant and

equipment (125,539,338,259 ) 7,091 (17,703,460 ) (17,703,460 )

Long-term employee benefits

liabilities (9,622,326,231 ) 19,500 (493,458 ) (493,458 )

Amortization of deferred

revenue 121,949,710 9,707 7,166 7,166

Intangible assets 84,982,118 11,859 12,563 12,563

Amortization of deferred

Charges (252,971,273 ) 2,243 (112,792 ) (112,792 )

(135,207,703,935 ) (18,289,981 ) (18,289,981 )

Estimated taxable loss for the year

before fiscal loss carry forward (1,573,351,864,992 ) 13,640 (115,348,378 ) (115,348,378 )

Fiscal loss carry forward (531,623,045,717 ) 12,441 (42,731,537 ) (42,731,537 )

Total estimated accumulated

taxable loss

(2,104,974,910,709

)

(158,079,915

)

(158,079,915

)


Prepaid taxes:

Income tax article 22 38,568,904,459 13,261 (2,908,430 ) (2,908,430 )

Estimated overpayment of

corporate income tax

38,568,904,459

(2,908,430

)

(2,908,430

)

Adjustment on corporate income tax 6,643,033 (1,566,830 ) (1,566,830 )

The estimated taxable loss for the year ended December 31, 2015 as reported in the 2015 corporate

income tax return amounted to Rp 1,541,619,431,131 and the tax return was submitted to the tax office

in April 2015.

In these consolidated financial statements, the amount of taxable loss as of December 31, 2016

amounted to US$ 97,686,913 is based on preliminary calculations, as the Company has not yet

submitted its yearly 2016 corporate income tax returns.





85


d. Deferred Tax Assets (Liabilities)

The calculation of deferred tax assets and deferred tax liabilities with the maximum tax tariff of 25%

in 2016 and 2015 are as follows:

2 0 1 6

As of

December 31,

2015

Credited (charged) to

the statement of

profit or loss and

other comprehensive

income for the year

Credited

(charged) to

equity

As of

December 31,

2016

US$ US$ US$ US$

Deferred tax assets (liabilities):

Accumulated taxable loss 39,519,978 (15,098,249 ) – 24,421,729

Valuation allowance (39,519,978 ) 15,098,249 – (24,421,729 )


property, plant and equipment

3,608,324

(4,207,370

)

–

(599,046

)

Long-term employee benefit liabilities 2,439,950 251,729 97,022 2,788,701

Amortization of deferred revenues (53,131 ) 3,141 – (49,990 )

Intangible assets (130 ) (26,701 ) – (26,831 )

Amortization of deferred charges 715,106 (26,786 ) – 688,320

Total deferred tax assets 6,710,119 (4,005,987 ) 97,022 2,801,154

2 0 1 5

As of

December 31,

2014

Credited (charged) to

the statement of

profit or loss and

other comprehensive

income for the year

Credited

(charged) to

equity

As of

December 31,

2015

US$ US$ US$ US$

Accumulated taxable loss 98,974,335 (59,454,357 ) – 39,519,978

Valuation allowance (98,974,335 ) 59,454,357 – (39,519,978 )


property, plant and equipment

8,034,189

(4,425,865

)

–

3,608,324

Long-term employee benefit liabilities 3,031,287 (123,364 ) (467,973 ) 2,439,950

Amortization of deferred revenues (56,272 ) 3,141 – (53,131 )

Intangible assets (1,921 ) 1,791 – (130 )

Amortization of deferred charges 743,304 (28,198 ) – 715,106

Total deferred tax assets 11,750,587 (4,572,495 ) (467,973 ) 6,710,119

There are no income tax charged/(credited) relating to other comprehensive income during the year.





86


d. Deferred Tax Assets (Liabilities) (Continued)

The recognition of the Company and its Subsidiaries’ deferred tax assets is based on management’s

estimates of the results of future operations including an estimate of output levels and commodity

prices for the Company and its Subsidiaries’ products, the timing and extent of the reversal of certain

of the Company and its Subsidiaries’deferred tax liabilities, and certain tax planning strategies. Based

on these estimates, management believes that the Company and its Subsidiaries will not realize its

deferred tax asset from fiscal loss carry forward. Accordingly, the management had made a valuation

allowance of US$ 24,421,729 and US$ 39,519,978 and as at December 31, 2016 and 2015,

respectively.

The basis supporting recognition of the deferred tax assets is reviewed regularly by management.

A reconciliation between the total tax expense (income) and the amounts computed by applying

the effective tax rate to profit (loss) before income tax is as follows:

2 0 1 6 2 0 1 5

US$ US$

Loss before income tax as consolidated

statements of profit or loss and other comprehensive

income

(6,962,105

)

(11,647,345

)

Profit before income tax of the Subsidiaries

Loss before income tax as statement of profit or loss

and other comprehensive income of the Company

(6,962,105

) (11,647,345

)

Tax benefit at tax rate 25% (1,740,526 ) (2,911,836 )

Taxable loss (profit) at tax rate 25% (3,833,760 ) 28,837,094

Tax effect of non-deductible expense

(non-taxable income) 9,580,273 (21,352,763 )

Total tax expense 4,005,987 4,572,495

e. Tax Expense 2 0 1 6 2 0 1 5

US$ US$

Current tax:

The Company (883,641 ) (1,566,830 )

Subsidiaries – –

(883,641 ) (1,566,830 )

Deferred tax expense:

The Company (4,005,987 ) (4,572,495 )

Subsidiaries – –

(4,005,987 ) (4,572,495 )

Total tax expense (4,889,628 ) (6,139,325 )





87


f. Tax Assessment Letter

a. Company

On December 14, 2016, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor

Pelayanan Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for

fiscal period December 2014. Based on the Indonesian Tax Authorities letter

No. 00124/207/14/092/16, the Company had additional tax liability of Rp 28,299,736.



fiscal period January 2015. Based on the Indonesian Tax Authorities letter

No. 00038/207/15/092/16, the Company had no additional tax liability or overpayment.



fiscal period February 2015. Based on the Indonesian Tax Authorities letter




fiscal period March 2015. Based on the Indonesian Tax Authorities letter




fiscal period April 2015. Based on the Indonesian Tax Authorities letter


On October 3, 2016, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor


fiscal period May 2015. Based on the Indonesian Tax Authorities letter

No. 00129/407/15/092/16, the Company had an overpayment of Rp 10,058,236,238. The

overpayment of Value Added Tax has been received in October 2016.



fiscal period June 2015. Based on the Indonesian Tax Authorities letter


overpayment of Value Added Tax has been received in January 2017.

On May 31, 2016, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor

Pelayanan Pajak Wajib Pajak Besar Dua) issued a Corporate Income Tax assessment letter for

fiscal year 2014. Based on the Indonesian Tax Authorities letter No. 00067/406/14/092/16,

the Company had an overpayment of Rp 64,420,363,000. The overpayment of Corporate

Income Tax were received in June 2016.





88


f. Tax Assessment Letter (Continued)

a. Company (Continued)

On July 6, 2015, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor Pelayanan

Pajak Wajib Pajak Besar Dua) issued a Value Added Tax assessment letter for fiscal period

July 2013. Based on the Indonesian Tax Authorities letter No. 00090/207/13/092/15, the

Company had additional tax liability of Rp 27,836,600. The tax liability had been

compensated in December 2015.



August 2013. Based on the Indonesian Tax Authorities letter No. 00091/207/13/092/15, the

Company had additional tax liability of Rp 61,952,966. The tax liability had been




September 2013. Based on the Indonesian Tax Authorities letter No. 00092/207/13/092/15,

the Company had additional tax liability of Rp 1,358,330. The tax liability had been




November 2013. Based on the Indonesian Tax Authorities letter No. 00089/207/13/092/15,

the Company had no additional tax liability or overpayment.



December 2013. Based on the Indonesian Tax Authorities letter No. 00046/407/13/092/15,

the Company had an overpayment of Rp 16,971,279,771. The overpayment of Value Added

Tax has been received in July 2015.

On February 20, 2015, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor


fiscal period October 2013. Based on the Indonesian Tax Authorities letter


overpayment of Value Added Tax has been received in March 2015.

On April 28, 2015, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor

Pelayanan Pajak Wajib Pajak Besar Dua) issued a Corporate Income Tax assessment letter for

fiscal year 2013. Based on the Indonesian Tax Authorities letter No. 00063/406/13/092/15,

the Company had an overpayment of Rp 62,694,794,000. The overpayment of Corporate

Income Tax were received in May 2015.





89





Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 21 assessment letter

for fiscal year 2013. Based on the Indonesian Tax Authorities letter No. 00005/201/13/092/15,


compensated in December 2015 with the overpayment of 2013 Corporate Income Tax.






Pelayanan Pajak Wajib Pajak Besar Dua) issued an Income Tax Article 4 (2) assessment letter



compensated in December 2015 with the overpayment of 2013 Corporate Income Tax.





On May 14, 2009, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor



the Company had additional tax liability of Rp 20,622,616,789. The tax liability had been

compensated in May 28, 2009 with the overpayment of 2007 corporate income tax of

Rp 19,748,829,575, and the remaining balance of Rp 873,787,214 was paid by cash on June

11, 2009. Further, based on the decision letter from Indonesian Tax Court vide

No. PUT.39097/PP/M.11/13/2012 dated July 26, 2012, the tax liability for 2007 was assessed

at Rp 78,391,606. Accordingly, the Company received the refund of Rp 20,544,225,183 in

August 2012. Based on the Tax Court’s decision No. 978/PK/PJK/2014 dated March 12, 2015,

the petition is denied by the Supreme Court.

Further, on November 14, 2016, the Indonesian Tax Authorities (Direktorat Jenderal Pajak

Kantor Pelayanan Pajak Wajib Pajak Besar Dua) issued SKPPIB (Surat Keputusan Pajak

Pemberian Imbalan Bunga) for Income Tax Article 26 for fiscal year January to December

2017. Based on the tax assessment letter, the Company received interest income for Income

Tax Article 26 amounting to Rp 9,861,228,088. This amount had been received

on January 2017.





90




On September 30, 2010, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor



the Company had an overpayment of Income Tax Article 26 of Rp 8,844,864,229. In the other

that, the Company also received the interest of Rp 4,245,534,829, the totaling of

Rp 13,090,399,058 had been received on November 24, 2010. Direktorat Jenderal Pajak has

filed a Review Petition (PK) against the verdict of refund. If Review Petition is accepted and

approved, the Company has to refund the above amount along with accrued interest. But until

the date of report finished, the result has not been determined yet.

On April 21, 2010, the Indonesian Tax Authorities (Direktorat Jenderal Pajak Kantor


for January to December 2008. Based on the Directorate General of Tax

No. 00014/204/08/092/10, the Company had additional tax liability of Rp 5,280,764,328 and

administrative penalties amounting to Rp 1,689,844,585. The Direktorat Jenderal Pajak has

filed a Review Petition (PK) against the verdict of refund on January 8, 2015 for the decision

letter No. Put.55433 / PP / M.XIA / 13/2014. Until the date of report finished, the result has

not been determined yet.

g. Administration

The Corporate Income Tax for year 2015 are being under examined by the Tax Authorities, and

until the date of report finished, the result has not yet been determined.

Under the taxation laws of Indonesia, the Company and its Subsidiaries submits tax returns on the

basis of self assessment. Under prevailing regulations the Director General of Tax (“DGT”) may

assess or amend taxes within a certain period. For the fiscal years of 2007 and before, this period

is within 10 (ten) years of the time the tax become due, but not later than 2013, while for the fiscal

years of 2008 and onwards, the period is within 5 (five) years of the time the tax becomes due.

The Company and its Subsidiaries’ management believe that the Company and its Subsidiaries

have complied with the prevailing tax regulations.

28. SHARE CAPITAL

Pursuant to the notarial deed of Januar Tirtaamidjaja, S.H., No. 22 dated February 15, 1984, the authorized

capital amounts to Rp 15,000,000,000 consisting of 600 shares with a par value of Rp 25,000,000 each.

Issued and fully paid-up capital amounts to Rp 7,500,000,000 (equivalent to US$ 6,710,179) or consist of

300 shares.





91

28. SHARE CAPITAL (Continued)

Pursuant to the General Shareholders Meeting with notarial deed of Aulia Taufani, S.H., No. 100 dated

December 27, 2002, the shareholders agreed to approve the changes in the Company’s Articles of

Association to increase the authorized capital from Rp 8,500,000,000,000 to become

Rp 16,000,000,000,000 and issued and paid-in capital from Rp 2,196,960,000,000 to become

Rp 4,174,224,000,000.

Pursuant to the notarial deed of Aulia Taufan, S.H., No. 12 dated July 4, 2006 regarding the amendment

of the Company’s Article of Association and the Extraordinary Shareholders’ Meeting with notarial deed

of the same notary No. 111 dated June 21, 2006, the shareholders approved the following:

• The authorized capital of the Company amounts to Rp 16,000,000,000,000 and issued and fully paid

up capital amounts to Rp 4,174,224,000,000.

• The allocation of 83,484,480,000 new shares (series C) par value Rp 2 each with to regard to the debt

to equity conversion. The new shares of 43,144,238,750 shares for the unsecured creditors and new

working capital lender and 40,340,241,250 shares for secured creditors.

• To record the paid in capital in excess of par value from debt to equity conversion of

Rp 5,574,513,535,500 (equivalent to US$ 618,017,022).

The deed was approved by the Minister of Justice and Human Right in his decision letter No. C-25038

HT.01.04.TH.2006 dated August 28, 2006 and registered in the Department of Industry and Trade under

No. 233/BH-1/IX/2006 dated September 1, 2006.

As of December 31, 2006, the authorized capital of the Company amounted to Rp 16,000,000,000,000

consisting of 247,145,100,800 shares with the following classifications.

• Series A of 17,000,000,000 shares with par value of Rp 500 each.

• Series B of 146,660,620,800 shares with par value of Rp 50 each.

• Series C of 83,484,480,000 shares with par value of Rp 2 each.

Issued and fully paid up capital was Rp 2,283,248,477,500 consisting of Series A of 4,393,920,000 shares,

and Series C of 43,144,238,750 shares.

In February 2008, the Company amended its Articles of Association in connection with the reverse stock

split with ratio 20: 1. Based on the notarial deed of Sutjipto S.H., No. 91 dated February 21, 2008 regarding

the changes of the Articles of Association, the authorized capital of the Company amounts to

Rp 16,000,000,000,000 consisting of 12,357,255,040 shares with following classifications:

Series A of 850,000,000 shares with par value of Rp 10,000 each.

Series B of 7,333,031,040 shares with par value of Rp 1,000 each.

Series C of 4,174,224,000 shares with par value of Rp 40 each.





92


Issued and fully paid in capital amounted to Rp 4,174,224,000,000 (26%) consist of:

219,696,000 shares with par value of Rp 10,000 each or totaling Rp 2,196,960,000,000.

1,890,975,522 shares with par value of Rp 1,000 each or totaling Rp 1,890,975,522,000.

2,157,211,950 shares with par value of Rp 40 each or totaling Rp 86,288,478,000.

The composition of stockholders as of February 21, 2008 based on notarial deed is as follows:

Numbers of Percentage of Total

Stockholders Shares ownership Rp US$

%

Shares Series A 219,696,000 5.15 2,196,960,000,000 625,598,841

Shares Series B 1,890,975,522 44.30 1,890,975,522,000 209,642,519

Shares Series C 2,157,211,950 50.55 86,288,478,000 9,566,350

Total 4,267,883,472 100.00 4,174,224,000,000 844,807,710

The deed was approved by the Minister of Justice and Human Rights in his decision letter No. AHU-

10588.AH.01.02 Tahun 2008 dated March 3, 2008.

Based on the Extraordinary General Stockholders Meeting (RUPSLB) held on March 24, 2009 and based

on notarial deed No. 91 dated March 24, 2009 of Sutjipto, S.H., notary in Jakarta, the stockholders

approved the issuance of 118,845,397 new authorized shares series C (5% of issued and paid-up capital)

without preemptive rights in the framework of Grant Date I of stock options programme to the Company’s

management and employees (Management Employee Stock Option Programme / MESOP). The notarial

deed was approved by the Minister of Law of the Republic of Indonesia based on his decision letter

No. AHU-0052619.AH.01.09.Tahun 2009 dated August 14, 2009. Based on the Company’s schedule that

was reported to PT Bursa Efek Indonesia dated March 17, 2009, this program will be implemented on the

period below:

Period Implementation Period

I 5 (five) trading days starting from April 1, 2009

II 5 (five) trading days starting from October 1, 2009

III 5 (five) trading days starting from April 1, 2010

IV 5 (five) trading days starting from October 1, 2010

V 5 (five) trading days starting from April 1, 2011

VI 5 (five) trading days starting from October 3, 2011

VII 5 (five) trading days starting from February 1, 2012

Based on the notarial deed of Aryanti Artisari, S.H., M.Kn. No. 107 dated February 23, 2012, the

stockholders approved the exercise price for the first stock option programme of Rp 45 per share. On

March 5, 2012, the Company issued 118,845,397 new authorized shares series C with par value of Rp 40

each or totaling Rp 4,753,815,880 (equivalent to US$ 524,125). The deed was approved by the Minister of Law

and Human Rights in his decision letter No. AHU-0018443.AH.01.09.Tahun 2012 dated February 29, 2012.





93


The composition of stockholders as of December 31, 2016 and 2015 based on the stockholder’s list issued by

the Stock Administrative Office, PT Datindo Entrycom, of listed shares of the Company is as follows:

2 0 1 6


Stockholders Shares Ownership Rp US$

%

Shares Series A:

PT Multikarsa Investama

(shares under sale to PT Bina Prima

Perdana)

131,394,719

5.26

1,313,947,195,000 374,155,125

Public (below 5% each) 88,301,281 3.54 883,012,805,000 251,443,716

219,696,000 8.80 2,196,960,000,000 625,598,841

Shares Series B: – – – –

Shares Series C:

Damiano Investments BV.,

Netherland

1,443,805,382

57.85

57,752,215,280

6,402,685

Others 649,611,983 26.03 25,984,479,320 2,880,763

Unsettled 182,639,982 7.32 7,305,599,320 807,027

2,276,057,347 91.20 91,042,293,920 10,090,475

Total 2,495,753,347 100.00 2,288,002,293,920 635,689,316

2 0 1 5


Stockholders Shares Ownership Rp US$

%

Shares Series A:

PT Multikarsa Investama

(shares under sale to PT Bina Prima

Perdana)

131,394,719

5.26

1,313,947,195,000

374,155,125

Public (below 5% each) 88,301,281 3.54 883,012,805,000 251,443,716

219,696,000 8.80 2,196,960,000,000 625,598,841

Shares Series B: – – – –

Shares Series C:

Damiano Investments BV.,

Netherland

1,289,079,472

51.65

51,563,178,880

5,716,539

Kyoa Investment Limited 154,725,910 6.20 6,189,036,400 686,146

Others 649,611,983 26.03 25,984,479,320 2,880,763

Unsettled 182,639,982 7.32 7,305,599,320 807,027

2,276,057,347 91.20 91,042,293,920 10,090,475

Total 2,495,753,347 100.00 2,288,002,293,920 635,689,316





94


Unsettled shares series C represent the creditors that have not exchanged with the new shares (through The

Hong kong and Shanghai Banking Corporation Limited, Hong Kong – the custodian). These shareholders’

name is not yet registered in PT Datindo Entrycom (share administrator).

Further, based on the Extraordinary General Stockholders Meeting (RUPSLB) held on June 18, 2012 and

based on notarial deed No. 88 dated June 18, 2012 of Aryanti Artisari, S.H., M.Kn., notary in Jakarta, the

stockholders approved the issuance of 74,872,600 new authorized shares series C (3% of issued and paid-

up capital) without preemptive rights in the framework of Grant Date II of stock options programme to the

Company’s management and employees (Management Employee Stock Option Programme / MESOP).

The Company’s schedule that was reported to PT Bursa Efek Indonesia dated March 17, 2012 is as follows:

Period Implementation Period

I Starting from December 15, 2012 up to December 22, 2012

II Starting from June 18, 2013 up to June 24, 2013

III Starting from December 18, 2013 up to December 24, 2013

IV Starting from June 2, 2014 up to June 24, 2014

The Company has sent a letter No. 068/APF-CS/VI/2014 dated June 25, 2014 and No. 071/APF-

CS/VII/2014 dated July 7, 2014 to Otoritas Jasa Keuangan (OJK) regarding the cancellation of MESOP

implementation due to the non-completion of secured debts restructuring. Further, based on the

Extraordinary General Stockholders Meeting (RUPSLB) held on June 16, 2015 notarial deed No. 49 dated

June 16, 2015 of Aryanti Artisari, S.H., M.Kn, the stockholders approved the cancelation of MESOP

implementation.

According to notarial deed of DR. H. Teddy Anwar, S.H., Spn. No. 111 dated August 16, 2002, the part

of PT Multikarsa Investama’s shares of 2,454,081,290 (or after reverse stock 122,704,064 shares) were

sold to PT Bina Prima Perdana. However, based on the data issued by PT Datindo Entrycom, the shares

are still registered under the name of PT Multikarsa Investama.

As of December 31, 2016 and 2015, the shares owned by the public included those owned by the directors

of the Company are as follows:

2 0 1 6 2 0 1 5

Mr. Seeniappa Jegatheesan 29,713,388 29,713,388

Mr. Peter Vinzenz Merkle 2,711,000 2,711,000

Mr. Bonar Firman Hasiholan Sirait 1,359,500 1,359,500

Total 33,783,888 33,783,888





95

29. ADDITIONAL PAID-IN CAPITAL

2 0 1 6 2 0 1 5

US$ US$

Paid-in capital in excess of par value from

public offering in 1990 13,571,804 13,571,804

Shares issuance cost (7,263,223 ) (7,263,223 )

Subtotal 6,308,581 6,308,581

Difference on restructuring among companies

under common control in 2001 (Note 1c)

(21,339

)

(21,339

)


conversion of debt to equity in 2006 618,017,022 618,017,022


1st MESOP in 2012 65,516 65,516

Shares issuance cost (46,612 ) (46,612 )

Subtotal 18,904 18,904

Total 624,323,168 624,323,168

As per the Composition Proposal (Peace Plan) the Company is issuing 16,780,718,747 shares series C to

unsecured creditors and 26,363,520,000 shares series C for Damiano Investments BV., Netherland in

regard to debt to equity conversion of Rp 5,660,802,013,000.

Further, based on the amendment of the Company’s Articles of Association dated July 4, 2006 by notarial

deed No. 12 of Aulia Taufani, S.H., the Company has recognized the advances for future stock subscription

of Rp 5,660,802,013,000 as issued and paid-in capital amounting to Rp 86,288,477,500 and as additional

paid-in capital amounting to Rp 5,574,513,535,500 (equivalent to US$ 618,017,022).

Further, through the framework of Grant Date I of stock options programme in February 23, 2012, the

Company received Rp 5,348,042,865 for the issuance of 118,845,397 new authorized shares series C, with

a nominal value amounting to Rp 40 per share. The conversion rate of US$ 1 is Rp 9,070.

30. APPROPRIATE RETAINED EARNINGS

Under Indonesian Limited Company Law, the Company is required to set up a statutory reserve amounting

to at least 20% of the Company’s issued and paid up capital.

And, based on the annual general stockholders’ meeting as stated in notarial deed No.351 dated June 23,

1997 and No.402 dated June 24, 1996 of Adam Kasdarmadji SH, notary public in Jakarta, the stockholders

agreed to appropriate a general reserve aggregating Rp 8,280,000,000 (equivalent to US$ 2,345,301) from

retained earnings in accordance with article 61 of the Corporate Law No. 1 year 1995 for Limited Liability

Companies. In 2016 and 2015, the Company was exempted from reserving additional amounts due to its

accumulated deficit.





96

31. LOSS PER SHARE

2 0 1 6 2 0 1 5

US$ US$

Weighted average number of shares outstanding 2,495,753,347 2,495,753,347

Total loss for the year (11,868,369 ) (17,786,672 )

Basic loss per share attributable to the

owners of the Company

(0.004

)

(0.006

)

32. NON-CASH TRANSACTIONS

In 2016 and 2015, the principal non-cash transaction consist of:

a. An acquisition vehicles by means of credit financing payable as discussed in Notes 14 and 22.

b. A reclassification of interest payables from accrued expenses to unsecured debts and notes payables

as discussed in notes 17 and 20.

33. INSURANCE CLAIM SETTLEMENT, NET

2 0 1 6 2 0 1 5

US$ US$

Gain (loss) on fire:

Receipt from insurance claim 4,932,918 1,249,994

Book value on disposal of property, plant and

equipments (Note 14)

Net gain on fire 4,932,918 1,249,994

Receipt insurance claim on transit inventory loss

from damage 705,484 453,134

Total 5,638,402 1,703,128

In March 2014, a manufacturing unit compressing of building and machinery at Semarang plant were

affected by fire. The Company has received a portion of insurance settlement from the Insurance Company.





97

34. NET SALES

2 0 1 6 2 0 1 5

US$ US$

Local

Fibre 136,675,846 140,841,365

Yarn 135,164,885 149,006,270

Chips 21,438,715 21,349,643

Fleece (Knitting) 7,904,676 7,057,056

Others − 419,654

301,184,122 318,673,988

Export

Yarn 38,129,749 49,727,283

Fibre 13,131,574 14,087,184

Chips 1,399,600 2,780,005

Fleece (Knitting) 683,263 686,110

Others 1,220,632 1,056,200

PTA − 43,000

54,564,818 68,379,782

Total 355,748,940 387,053,770

In 2016 and 2015, net sales of fleece (knitting) were US$ 8,587,959 and US$ 7,743,166, respectively

consists of sales to third parties. The product is manufactured by PT Texmaco Jaya Tbk (under bankruptcy)

based on the tolling basis.

In 2016 and 2015, no sales were earned from sales to related parties.

In 2016 and 2015, no sales to third parties exceeded 10% of the operating revenues.

35. OTHER OPERATING REVENUES

2 0 1 6 2 0 1 5

US$ US$

Indirect materials damage 701,581 1,687,248

Product non-standard and others 4,030,231 1,314,978

Total 4,731,812 3,002,226

In 2016 and 2015, other operating revenues of fleece were US$ 86,795 and US$ 58,346, respectively

represents the other operating revenues to third parties. The product is manufactured by PT Texmaco Jaya

Tbk (under bankruptcy) based on the tolling basis.





98

35. OTHER OPERATING REVENUES (Continued)

In 2016 and 2015, no other operating revenues were earned from related parties.

In 2016 and 2015, no sales to third parties exceeded 10% of the operating revenues.

36. COST OF GOODS SOLD

2 0 1 6 2 0 1 5

US$ US$

Raw materials

At beginning of year 8,335,248 11,384,096

Purchases 225,178,798 228,827,911

Available for use 233,514,046 240,212,007

At end of year (9,859,792 ) (8,335,248 )

Raw materials used 223,654,254 231,876,759

Indirect materials


Purchases 37,365,367 42,609,948

Available for use 57,570,244 64,385,042

At end of year (20,315,942 ) (20,204,877 )

Indirect materials used 37,254,302 44,180,165

Direct labor 9,761,244 9,098,415

Manufacturing expense (Note 37) 68,801,649 87,024,052

Total manufacturing cost 339,471,449 372,179,391

Work in process


At end of year (3,707,551 ) (5,479,938 )

Cost of goods manufactured 341,243,836 372,045,119

Finished goods


At end of year (25,972,215 ) (27,267,217 )

Loss on inventory write-down 41,365 −

Reversal of inventory write-down (Note 9) − (53,047 )

Total 342,580,203 381,902,793





99

36. COST OF GOODS SOLD (Continued)

In 2016 and 2015, total raw material and indirect material used included the raw material used for fleece

(knitting) product after eliminated intercompany account were US$ 1,704,822 and US$ 1,698,125,

respectively.

In 2016 and 2015, there are no purchases from related parties.

In 2016 and 2015, purchases from third parties exceeded 10% of total purchases are as follows:

2 0 1 6

US$ Percentage

Kolmar Petrochemicals AG, Switzerland

PT Polychem Indonesia 50,504,721 13,26%

PT Cipta Karya Persada

2 0 1 5

US$ Percentage

Kolmar Petrochemicals AG, Switzerland 64,898,476 16.25%

PT Polychem Indonesia 62,101,490 15.55%

PT Cipta Karya Persada 50,710,679 12.70%

37. MANUFACTURING EXPENSES

2 0 1 6 2 0 1 5

US$ US$

Electricity and gas 50,845,347 64,141,381

Depreciation expense of property, plant and equipment (Note 14) 4,652,987 5,826,304

Freight 3,012,082 3,249,296

Processing fee (tolling) 2,654,067 2,710,297

Insurance 2,213,980 2,550,556

Rental 1,951,757 2,578,376

Repair and maintenance 1,486,475 1,499,058

Salary and allowances 1,289,468 1,200,486

Others 695,486 3,268,298

Total 68,801,649 87,024,052

In 2016, the processing fee (tolling) of US$ 2,654,067 represent the processing fee to PT Texmaco Jaya

Tbk (under bankruptcy) amounting to US$ 551,124 and PT Multikarsa Investama amounting to

US$ 2,102,943. And in 2015, the processing fee (tolling) of US$ 2,710,297 represent the processing fee

to PT Texmaco Jaya Tbk (under bankruptcy) amounting to US$ 546,601 and PT Multikarsa Investama

amounting to US$ 2,163,696 (Note 42).

In 2016 and 2015, rental expenses to PT Texmaco Jaya Tbk (under bankruptcy) were US$ 137,998 and

US$ 140,008, respectively (Note 42).





100

38. SELLING EXPENSES

2 0 1 6 2 0 1 5

US$ US$

Freight 3,686,882 4,295,782

Export charges 2,228,454 2,711,337

Marketing expenses 1,752,536 3,302,517

Advertising and promotion 11,989 19,176

Others 319,742 457,675

Total 7,999,603 10,786,487

39. GENERAL AND ADMINISTRATIVE EXPENSES

2 0 1 6 2 0 1 5

US$ US$

Salaries, wages and benefits 7,848,500 7,434,695

Employees’ entitlement (Note 25) 1,594,554 1,543,046

Professional fees 1,290,961 927,372

Business traveling 952,222 988,523

Rent 844,698 732,964

Communication 378,380 386,788

Stationery 365,429 237,651

Tax expense 259,073 545,832

Repairs and maintenance 194,502 90,481

Depreciation expense of property, plant and equipment (Note 14) 139,521 114,108

Entertainment and representation 126,373 101,956

Donation and Corporate Social Responsibility 119,321 116,373

Electricity and water 40,194 46,555

Insurance 20,684 64,534

Amortization expenses (Note 15) 6,272 6,274

Others 1,205,465 1,062,156

Total 15,386,149 14,399,308

40. FINANCE COSTS

2 0 1 6 2 0 1 5

US$ US$

Finance costs:

Interest expense from working capital loan (Note 21) (3,244,042 ) (2,938,380 )

Interest expense from unsecured debts and

notes payable (Note 20)

(982,016

)

( 971,905

)

Interest expense from credit financing payables

(Note 22)

(10,561

)

(7,326

)

Total interest expense (4,236,619 ) (3,917,611 )





101

40. FINANCE COSTS

2 0 1 6 2 0 1 5

US$ US$

Fee on Bank loans (Note 18) − (3,645,045 )

Bank charges (237,027 ) (323,888 )

Total finance costs (4,473,646 ) (7,886,544 )

Finance Income:

Interest income from current accounts and

time deposits

22,498

22,694

Total (4,451,148 ) (7,863,850 )

41. MISCELLANEOUS INCOME, NET

2 0 1 6 2 0 1 5

US$ US$

Interest income from income tax art. 26 fiscal year 2007 733,941

Claim of demurrage 38,360

Amortization of deferred revenues (Note 24) 12,563 12,563

Payables’ written-off (1,516 ) 4,708

Others 391,536 291,798

Total 1,174,884 309,069

42. RELATED PARTY TRANSACTIONS

The Company is controlled by Damiano Investments BV. (domiciled in Netherland) which owns

1,443,805,382 of the Company’s shares (57.85%). The ultimate parent of the Company is ADM Capital

and Spinnaker Capital Group, which are incorporated and domiciled in Hong Kong and United Kingdom,

respectively.

Nature of Relationships and transactions

Nature of Nature of

Name of related parties relationship Transactions

Damiano Investments BV., Netherland Stockholder Loans, shareholder

PT Texmaco Jaya Tbk (under bankruptcy) Affiliated company Tolling arrangement

Kyoa Investment Limited Stockholder Loans, shareholder

PT Pacific Poly Affiliated company Rental agreement

Mr. Agus Tjahajana Wirakusumah Independent Commissioner Compensation and renumeration





102

42. RELATED PARTY TRANSACTIONS (Continued)

Nature of Relationships and transactions (Continued)

Nature of Nature of

Name of related parties relationship Transactions

Mr. Dono Iskandar Djojosubroto Independent Commissioner Compensation and renumeration

Mr. Bonar Firman Hasiholan Sirait Independent Director Compensation and renumeration

Mr. Antonius Widyatma Sumarlin Independent Director Compensation and renumeration

Mr. Vasudevan Ravi Shankar President Director Compensation and renumeration

Mr. Seeniappa Jegatheesan Director Compensation and renumeration

Mr. Peter Vinzenz Merkle Director Compensation and renumeration

Related Party Transactions

In the normal course of business, the Company and its Subsidiaries entered into certain business and

financial transactions with its related parties. These transactions are normally made at normal price and

conditions as of they were done with non-related parties. These transactions are as follows:

Percentage to total

Assets/ Liabilities

/Expenses

2 0 1 6 2 0 1 5 2 0 1 6 2 0 1 5

US$ US$ % %

Other payable 214,443 59,916 0.01 0.00

Accrued expenses 14,283,483 14,287,803 1.22 1.23

Bank loans 85,729,859 88,135,313 7.33 7.62

Secured debts 679,341,624 661,662,491 58.12 57.17

Working capital loans 23,570,000 22,070,000 2.01 1.91

Manufacturing expenses to related parties accounted for 4.05% and 3.28% for the years ended

December 31, 2016 and 2015, respectively (Note 37).





103

42. RELATED PARTY TRANSACTIONS (Continued)

The details of processing fee (tolling) and rental expenses to related parties are as follows:

2 0 1 6 2 0 1 5

US$ US$

PT Texmaco Jaya Tbk (under bankruptcy) 9 689,123 686,609

Total 689,123 686,609

Key management compensation

Key management personnel of the Company are the Boards of Commissioners and Directors as

detailed in Note 1d.

Compensation representing salary was given to the Company’s Commissioners and Directors for the

years ended December 31, 2016 and 2015 amounting to Rp 11,684,960,602 and Rp 10,099,334,912,

respectively. No contribution to retirement benefits, entitlement benefits and any other special benefits

were given during the year 2016 and 2015.

43. SIGNIFICANT AGREEMENTS

Tolling Agreement with PT Texmaco Jaya Tbk (under bankruptcy)

On April 1, 2008, the Company arranged the tolling / rental agreement with PT Texmaco Jaya Tbk for a

period of twelve (12) months and can be renewed. This agreement is prepared because the Subsidiary

does not have the necessary working capital to service the orders from its customers. Based on this

agreement, the Company should pay the conversion charges that consisting of tolling fee, building and

machinery rental to PT Texmaco Jaya Tbk each month. The tolling fees are calculated based on the

production results.

On August 3, 2009, the Company arranged the amendment of tolling agreement with PT Texmaco Jaya

Tbk for a period of three (3) months and can be renewed. Based on this agreement, the Company should

pay the tolling fee of US$ 1.20 per yard with the minimum production results of 100,000 yards to

PT Texmaco Jaya Tbk each month. And on October 23, 2009, the Company renewed the tolling / rental

agreement for seven (7) months from November 1, 2009 up to June 30, 2010.

On July 15, 2010, the Company arranged the amendment of tolling agreement with PT Texmaco Jaya

Tbk for fifthteen (15) months from July 1, 2010 up to September 30, 2011 and can be renewed. Based on

this agreement, the Company should pay the tolling fee of US$ 1.20 per yard for the contract period from

July 1, 2010 up to September 30, 2010, and US$ 0.75 per yard for the contract period from

October 1, 2010 up to September 30, 2011.





104

43. SIGNIFICANT AGREEMENTS (Continued)

Tolling Agreement with PT Texmaco Jaya Tbk (under bankruptcy) (Continued)

On January 10, 2011, the Company arranged the amendment of tolling agreement with PT Texmaco Jaya

Tbk for five (5) years from January 1, 2011 up to December 30, 2016 and can be renewed for three (3)

years later. Based on this agreement, the Company should pay the tolling fee of US$ 0.30 per kgs and at

least US$ 50,000 per month.

Further, based on the amendment of tolling agreement with PT Texmaco Jaya Tbk (under bankruptcy)

dated March 23, 2012, the Company agreed to pay the tolling fee of US$ 0.30 per kgs and subject to

minimum fee of US$ 64,000 per month. With effect from January 2014, the tolling fees was became at

least Rp 600,000,000 per month as per amendment agreement No. 006/APF/III/2014 dated

March 11, 2014.

Warehouse Agreement with PT Texmaco Jaya Tbk (under bankruptcy)

Based on the land rental agreement dated June 15, 2009 between the Company and PT Texmaco Jaya

Tbk (under bankruptcy), the Company agreed to rent the land for 950 meters of gas pipe, 1,500 meters of

water pipe, 800 meters of water pump facility and 1,000 meters of electricity cable. This agreement is

valid for thirty (30) years from January 1, 2010 up to December 31, 2040. As consequently, the Company

should pay the rental expenses amounted to Rp 100,000,000 per month.

Based on the warehouse rental agreement dated March 30, 2011 between the Company and PT Texmaco

Jaya Tbk (under bankruptcy), the Company agreed to rent the warehouse for ten (10) months from March

1, 2011 up to December 31, 2011. Based on the amendment agreement dated June 28, 2012, December

28, 2012, July 1, 2013, January 1, 2014, July 1, 2014, December 31, 2014, July 1, 2015, and January 1,

2016, the Company agreed to extent the warehouse rental up to June 30, 2016. In July 1, 2016, this

agreement has been extended until December 31, 2016. Further, based on the amendment agreement

dated January 1, 2017, the Company agreed to extent the warehouse rental up to June 30, 2017. As

consequently, the Company should pay the rental expenses amounted to Rp 43,200,000 per month.

Based on the warehouse rental agreement dated January 2, 2012 between the Company and PT Texmaco

Jaya Tbk (under bankruptcy), the Company agreed to rent the Coating’s warehouse for one (1) years from

January 2, 2012 up to December 31, 2012. Based on the amendment agreement dated November 28, 2012,

June 1, 2013, November 29, 2013 and May 30, 2014, the Company agreed to extent the warehouse rental

up to December 31, 2014. Based on the latest amendment agreement dated December 31, 2014, the

Company agreed to extent the warehouse rental up to May 31, 2015. Further, based on the amendment

agreement dated 30 May 2015, the Company agreed to extent the warehouse rental up to December 31,

2015. And based on the latest amendment agreement dated December 31, 2015, the Company agreed to

extent the warehouse rental up to 31 May 2016. As consequently, the Company should pay the rental

expenses amounted to Rp 5,000,000 per month.





105


Warehouse Agreement with PT Texmaco Jaya Tbk (under bankruptcy) (Lanjutan)

Based on the warehouse rental agreement dated November 28, 2012 between the Company and

PT Texmaco Jaya Tbk (under bankruptcy), the Company agreed to rent the chiller machinery for one (1)

years from January 1, 2013 up to December 31, 2013. Based on the amendment agreement dated

December 30, 2014, the Company agreed to extent the rental of the chiller machinery up to December

31, 2015. Further, based on the latest amendment agreement dated December 30, 2015, the Company

agreed to extent the warehouse rental up to December 31, 2016. The latest amendment agreement on

December 31, 2016, the Company agreed to extent the rental of the chiller machinery up to December

31, 2017. As consequently, the Company should pay the rental expenses amounted to Rp 5,000,000 per

month.

Based on the warehouse rental agreement dated June 12, 2014 between the Company and PT Texmaco

Jaya Tbk (under bankruptcy), the Company agreed to rent the Suiting’s warehouse for six (6) months

from July 1, 2014 up to December 31, 2014. Further, based on the latest amendment agreement dated

December 31, 2014, the Company agreed to extent the warehouse rental up to March 31, 2015. As

consequently, the Company should pay the rental expenses amounted to Rp 12,000,000 per month.

Warehouse Agreement with PT Texmaco Taman Synthetics

Based on the rental agreement dated August 1, 2011 between the Company and PT Texmaco Taman

Synthetics, the Company agreed to rent the warehouse to put the laboratory equipments for five (5) years

from August 1, 2011 up to July 31, 2015. As consequently, the Company should pay the rental expenses

amounted to Rp 99,000,000 per month.

Gas Turbine with PT Wismakarya Prasetya

Based on the correspondence letter dated March 27, 2013, the Company agreed to pay the extra charges

amounted to US$ 250,000 per month for 6 (six) months. Accordingly, the Company has paid US$ 250,000

per month beginning April 2013 until June 2013 for 3 (three) months. PT Wismakarya Prasetya (WKP),

which is supplying 100% energy requirement of the Company’s facility at Karawang, has been declared

bankrupt effective on October 22, 2013 by the Supreme Court, Jakarta as per its verdict

No:440k/Pdt.sus.PAILIT/2013 dated October 22, 2013, based on the debt claim filed by its creditors.

However, the Court has decided to keep WKP as a going concern as it is supplying the energy requirement

of Karawang facility vide its decision vide No.: 440K/PDT.SUS/PAILIT/2013 j.o.

No: 05/Pdt.sus/PKPU/2013/PN.Niaga.Jkt.Pst. dated on February 13, 2014.

Based on the equipment rental agreement dated April 16, 2014 between the Company and PT Wismakarya

Prasetya (under bankruptcy), the Company agreed to rent the power and supply equipment for five (5)

years from January 1, 2014 up to December 31, 2018. This equipments consist of 4 (four) power supply

“Cogen Mitsubishi with capacity 12.50 MW + HRSG” and 1 (one) power supply “ABB/Siemens with

capacity 20 MW + HRSG”. As consequently, the Company should pay the rental expenses amounted to

US$ 40,800 per month. On November 5, 2014, the “ABB/Siemens Turbine with capacity 20

MW + HRSG” has been bought by the Company on a public auction from the curator through 4th Loan

facility from Damiano Investments BV., Netherland.





106


Gas Turbine with PT Wismakarya Prasetya (Continued)

Further based on the amendment agreement dated November 24, 2014 between the Company and

PT Wismakarya Prasetya (under bankruptcy), the rental expenses has been changed from US$ 40,800 to

US$ 30,600 each month towards the rental for the balance of 4 (four) turbines. This agreement is valid

for 4 (four) years from January 1, 2015 up to December 31, 2018.

Based on the amendment agreement dated December 18, 2015 between the Company and PT Wismakarya

Prasetya (under bankruptcy), the rental expenses has been changed from US$ 30,600 to Rp 210,375,000

each month towards the rental for the balance of 3 (three) turbines. This agreement is valid for 3 (three)

years from January 1, 2016 up to December 31, 2018.

Power Supply Agreement with PT Perusahaan Listrik Negara (Persero) (PLN)

Based on the agreement dated October 17, 2016 between the Company and PT Perusahaan Listrik Negara

(Persero) ("PLN"), PLN agreed to provide the Premium Bronze electricity supply to the Company. Under

this agreement, PLN will provide 150 kV high voltage electrical to the Company’s installation which

located in Kendal, Central Java. This service will be effective starting in November 2016, and

consequently the Company will be subject to subscription price adjustment amounting to

Rp 18,917,000,000.

Rental Agreement with PT Pacific Poly

The Company has entered into an agreement with PT Pacifi Poly for the usage of machinery, land, and

building (facility) on rental basis. As per amendment of the agreement dated January 1, 2016, the rental

amount has been revised to US$ 50,000 per quarter.

44. COMMITMENT

(a) Capital Commitments

The capital expenditure committed but not yet incurred as of December 31, 2016 is approximately

US$ 3,716,174. This is for the maintenance of turbine in Karawang and additional equipment in

Semarang.

Amount outstanding above is relating to commitment made by the Company in development and

increase in the Company’s filament yarn and fiber capacity. The commitment has to be exercised at

the year 2016.

(b) Operating Lease Commitments

The Company leases various warehouse under non-cancellable operating lease agreements. The lease

terms are between 1 (one) year up to thirty (30) years, and the majority of lease agreements are

renewable at the end of the lease period.





107

44. COMMITMENT (Continued)

(b) Operating Lease Commitments (Continued)

The following are counterparties of the Company’s lease commitments:

Counterparties Leased items Period of agreement Amount (Rp)

PT Texmaco Jaya Tbk

(under bankruptcy)

Warehouse at

Karawang

January 1, 2016 –

June 30, 2016

Rp 43,200,000

each month

July 1, 2016 –

Decembers 31, 2016

Rp 43,200,000

each month

January 1, 2017 –

June 30, 2017

Rp 43,200,000

each month

Coating Warehouse

at Karawang

January 1, 2016 –

May 31, 2016

Rp 5,000,000

each month

Suiting Warehouse

at Karawang

January 1, 2015 –

March 31, 2015

Rp 5,000,000

each month

Chiller’s Machine at

Karawang

December 31, 2015–

December 31, 2016

Rp 5,000,000

each month

January 1, 2017–

December 31, 2017

Rp 5,000,000

each month

Land at Karawang

January 1, 2010 –

December 31, 2040

Rp 100,000,000

each month

PT Wismakarya Prasetya

(under bankruptcy)

Turbine Machine

at Karawang

January 1, 2015 –

December 31, 2018

US$ 30,600

each month

PT Texmaco Taman

Synthetics

Warehouse at

Semarang

August 1, 2011 –

October 31, 2015

Rp 99,000,000

each month

November 1, 2015 –

January 31,2016

Rp 130,000,000

each month

Februari 1, 2016 –

January 31, 2018

Rp 160,000,000

each month

The future aggregate minimum lease payment under non-cancellable operating leases are as follows:

2 0 1 6 2 0 1 5

US$ US$

No later than 1 year 9 623,169 617,222

Later than 1 year and no later than 5 years 825,670 1,447,692

Later than 5 years 1,518,309 144,980

Total 9 2,967,148 2,209,894





108

45. CONTINGENCIES

Effective August 19, 2011, one of Subsidiary (PT Texmaco Jaya Tbk) becomes subject to the control of

Court, causing the Company to lose its control. The Count has already set a Supervisory Judge and curator

team to maintain and monitor the operation of bankruptcy assets and cash flows of the Subsidiary. Net

liabilities at the date of lost its control is Rp 656,593,951,279. PT Asia Pacific Fibers Tbk as parent

Company do not have obligation regarding the creditors’ payables of Subsidiary.

Based on the correspondence letter from PT Bina Prima Perdana dated August 8, 2011, PT Bina Prima

Perdana claims from the Company being the guarantor of the Subsidiary’s loans from Bank Dharmala and

Bank Arya. However, the management of the Company mentioned that the above guarantees (promissory

note) were not registered by PT Bina Prima Perdana during the debt verification by the curator of PT Asia

Pacific Fibers Tbk (formerly PT Polysindo Eka Perkasa Tbk) during its bankruptcy process in 2005, and

consequently, the above claims of PT Bina Prima Perdana were not valid. In addition, the restructuring

process of unsecured debt in PT Asia Pacific Fibers Tbk has been completed.

The Company’s land certificates with HGB No. 13 and HGB No. 14 located in Kiara Payung, Kec. Klari,

Karawang have been pledged to PT Bank Negara Indonesia/ PT Bina Prima Perdana in respect of secured

debts of PT Texmaco Jaya Tbk (under bankruptcy). PT Bina Prima Perdana has claimed with its letter dated

February 21, 2013 amounted to Rp 19 billion from the Company for the release of the pledge. This is under

discussion with PT Bina Prima Perdana (Note 15).

In 2015, Tomoe Engineering Co. Ltd. (Tomoe) filed a lawsuit against the Company in Pengadilan Negeri

Jakarta Selatan for breach of contract and claimed an amount of JPY 470,000,000 towards compensation

for the cancellation of order. The Company had earlier during 2010/2011 requested for quotation for supply

of spares for its PTA plant and held preliminary negotiations with the suppliers. Company has informed

the suppliers of its intention to procure the spares subject to finalization of negotiation. Tomoe claimed to

have procured the materials for the above and asked for the compensation from the Company. Company

defended this case and got a court verdict in its favour in January 2016. The District Court’s decision has

been received by the Company on February 25, 2016 through decision No. 388/Pdt.G/2015/PN.JKT.Sel

dated February 25, 2016.

46. SEGMENT INFORMATION

The Board of Director is the Company’s chief operating decision-maker. Management has determined the

operating segments based on the information reviewed by the Board of Director for the purposes of allocating

resources and accessing performance of the Company and its Subsidiaries.

The Company is managed and classified into business segments consist of plants which located as follows :

Year ended December 31, Year ended December 31,

2016 2015

Semarang Karawang Semarang Karawang

Revenues 178,745,621 299,382,534 205,385,980 313,361,287 Cost of goods sold (168,714,723 ) (291,438,975 ) (193,586,382 ) (317,007,682 )

Gross profit (loss) 10,030,898 7,943,559 11,799,598 (3,646,395 )

Expenses (19,392,894 ) (10,449,934 ) (16,135,661 ) (8,400,295 )

Net loss (9,361,996 ) (2,506,375 ) (4,336,063 ) (12,046,690 )

Segment assets 507,255,446 93,423,735 468,306,840 104,041,378

Segment liabilities 1,108,955,148 426,539,126 1,060,353,481 434,650,394





109

46. SEGMENT INFORMATION (Continued)

The Board of Director considers the business from both a geographic and product perspective.

Geographically, management considers the performance in Indonesia, Asia, America, Europe, Australia

and Africa. From a product perspective, management separately considers the business segment are as

follows:

1. Chemical industry and synthetic fibre

2. Weaving and knitting

Although the weaving and knitting segment does not meet the quantitative thresholds required by PSAK

5 for reportable segments, management has conclude that this segment should be reported, as it is closely

monitored by the strategic steering committee as a potential growth and is expected to materially contribute

the Company’s revenue in the future.

Chemical Weaving

Industry and and

2 0 1 6 Synthetic fibre Knitting Others Elimination Total

US$ US$ US$ US$ US$

SEGMENT SALES:

External sales

Local 297,924,461 7,991,471 – – 305,915,932

Export

Europe 24,599,273 20,508 – – 24,619,781

America 12,115,090 1,200 – – 12,116,290

Asia 13,509,628 661,555 14,171,183

Africa 2,435,814 – 2,435,814

Australia 1,221,752 – – – 1,221,752

Total Export 53,881,557 683,263 – – 54,564,820

Inter segment sales 117,647,403 – – (117,647,403 ) –

Total segment sales 469,453,421 8,674,734 – (117,647,403 ) 360,480,752

Segment result 17,694,702 353,664 – – 18,048,366

Unallocated expenses (24,310,748 ) (716,359 ) – – (25,027,107 )

Loss before income tax (6,616,046 ) (362,695 ) – – (6,978,741 )

Tax expense (4,889,628 )

Total loss for the year (11,868,369 )

Other comprehensive income (loss),

net after tax

(291,067

)

Total comprehensive loss for the year (12,159,436 )





110


Chemical Weaving

Industry and and

2 0 1 6 Synthetic fibre Knitting Others Elimination Total

US$ US$ US$ US$ US$

STATEMENT OF FINANCIAL

POSITION:

Segment assets 597,041,183 3,637,999 759,218,126 (1,128,747,792 ) 231,149,516

Segment liabilities 1,531,121,656 4,372,618 761,938,304 (1,128,716,901 ) 1,168,715,677

OTHER INFORMATION:

Capital expenditures 10,566,710 – – – 10,566,710

Depreciation expense 4,713,068 79,440 – – 4,792,508

2 0 1 5

SEGMENT SALES:

External sales

Local 314,619,158 7,057,056 – – 321,676,214

Export

Europe 31,538,631 5,968 – – 31,544,599

America 15,684,280 – – – 15,684,280

Asia 14,769,527 680,142 – – 15,449,668

Africa 4,687,398 – – – 4,687,398

Australia 1,013,836 – – – 1,013,836

Total Export 67,693,672 686,110 – – 68,379,781

Inter segment sales 128,691,271 – – (128,691,271 ) –

Total segment sales 511,004,101 7,743,166 – (128,691,271 ) 390,055,996

Segment result 6,831,637 1,321,566 8,153,203

Unallocated expenses (19,065,566 ) (734,984 ) (19,800,550 )

Profit (loss) before income tax (12,233,929 ) 586,582 (11,647,347 )

Tax expense (6,139,325 )

Total loss for the year (17,786,672 )

Other comprehensive income,

net after tax

1,403,917

Total comprehensive loss for the year (16,382,755 )





111


Chemical Weaving

Industry and and

Synthetic fibre Knitting Others Elimination Total

US$ US$ US$ US$ US$

2 0 1 5

STATEMENT OF FINANCIAL

POSITION:

Segment assets (569,844,453 ) (3,550,521 ) (759,218,126 ) 1,099,071,109 (233,541,991 )

Segment liabilities 1,492,128,186 3,922,444 761,938,304 (1,099,040,218 ) 1,158,948,716

OTHER INFORMATION:

Capital expenditures (7,774,375 ) (59,168 ) (7,833,543 )

Depreciation expense (5,870,764 ) (69,645 ) (5,940,409 )

The following table shows the carrying amount of segment non-current assets and additions to property,

plant and equipment by geographical area in which the assets are located:

Carrying amount non-current assets Additions to property, plant and equipment

December 31, December 31, December 31, December 31,

2 0 1 6 2 0 1 5 2 0 1 6 2 0 1 5

US$ US$ US$ US$

Indonesia 69,754,359 61,989,672 10,764,401 6,450,627

47. NET MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Company and its Subsidiaries have assets and liabilities denominated in foreign currencies as follows:

2 0 1 6 2 0 1 5

Foreign Equivalent in Foreign Equivalent in

Currency US$ Currency US$

Assets:

Cash and cash equivalents IDR 407,339,212 30,317 694,398,915 50,337

EUR 12 12 1,307 1,428

SGD 7,571 5,240 8,721 6,164

SEK − − 1,108 125

NOK 1,108 129 − −

Trade receivables:

Third parties IDR 140,092,294,366 10,426,637 122,614,319,220 8,888,316

Other receivables IDR 455,470,672,336 33,899,276 488,496,290,040 35,411,113

Other current financial assets IDR 6,120,998,946 455,567 5,941,270,183 430,682

Carried forward 44,817,178 44,788,165





112

47. NET MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

(Continued)

The Company and it’s Subsidiaries have assets and liabilities denominated in foreign currencies as follows:

(Continued)

2 0 1 6 2 0 1 5

Foreign Equivalent in Foreign Equivalent in

Currency US$ Currency US$

Assets: (Continued)

Brought forward 44,817,178 44,788,164

Non-trade receivables IDR 606,345,726,749 45,128,440 625,043,781,849 44,586,653

Other non-current financial

Assets

IDR 3,959,414,637

294,687

3,959,413,310

287,018

Total assets 90,240,305 89,661,835

Liabilities:

Trade payables:

Third parties IDR 74,463,024,065 5,542,047 73,779,315,675 5,348,265

EUR 291,553 307,286 515,773 563,432

YEN 4,419,000 37,955 3,742,080 31,066

SGD − − 640 452

CHF 14,000 13,731 12,316 12,456

Accrued expenses IDR 548,908,523,763 40,853,567 479,395,011,200 34,751,360

Secured Debts IDR 1,341,051,955,403 99,810,357 1,341,051,955,403 97,212,898

EUR 14,262,806 15,033,003 14,262,805 15,580,706

YEN 3,001,711,400 25,781,296 3,001,711,400 24,919,797

Other short-term financial

liabilities IDR 29,649,525,792 2,206,723 51,696,644,961 3,752,296

EUR − − 25,018 27,329

Credit financing payables IDR 1,473,858,100 109,695 652,765,605 47,319

Long-term employee benefit IDR 149,875,990,828 11,154,807 134,636,454,795 9,759,801

Total liabilities 200,850,467 192,007,177

Net liabilities (110,610,162 ) (102,345,341 )

Monetary assets and liabilities mentioned above are translated using Bank Indonesia closing rate as at

December 31, 2016 and 2015.





113

48. FINANCIAL RISK MANAGEMENT

The Company and its Subsidiaries have exposure to the following risks from its use of financial

instruments:

Credit Risk

Liquidity Risk

Market Risk

This note presents information about the Company and its Subsidiaries’ exposure to each of the above

risks, the Company and its Subsidiaries’ objectives, policies and processes for measuring and managing

risks, and the Company and its Subsidiaries’ management of capital. The main purpose of the Company

and its Subsidiaries’ dealings in financial instruments is to fund their respective operations and capital

expenditures. The Company and its Subsidiaries do not actively engage in the trading of financial assets

for speculative purposes nor does it write options. The BOD has overall responsibility for the establishment

and oversight of the Company and its Subsidiaries’ risk management framework. The BOD is also

responsible for developing and monitoring the Company and its Subsidiaries’ risk management policies.

The Company and its Subsidiaries’ risk management policies are established to identify and analyze the

risks faced by the Company and its Subsidiaries, to set appropriate risk limits and controls, and to monitor

risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect

changes in market conditions and the Company and its Subsidiaries’ activities. All risks faced by the

Company and its Subsidiaries are incorporated in the annual operating budget. Mitigating strategies and

procedures are also devised to address the risks that inevitably occur so as not to affect the Company and

its Subsidiaries’ operations and forecasted results. The Company and its Subsidiaries, through its training

and management standards and procedures, aims to develop a disciplined and constructive control

environment in which all employees understand their roles and obligations.

The BOD performs oversight role over financial reporting functions, specifically in the areas of managing

credit, liquidity, market and other risks of the Company and its Subsidiaries. The BOD undertakes reviews

of risk management controls and procedures and ensures the integrity of internal control activities which

affect the financial reporting system of the Company and its Subsidiaries.

a. Credit Risks

Credit risk represents the risk of loss the Company and its Subsidiaries would incur if customers and

counterparties fail to perform their contractual obligations.





114

48. FINANCIAL RISK MANAGEMENT (Continued)

a. Credit Risks (Continued)

Financial information on the Company and its Subsidiaries’ maximum exposure to credit risk as of

December 31, 2016 and 2015, without considering the effects of collaterals and other risk mitigation

techniques, is presented below:

2 0 1 6 2 0 1 5

US$ US$

Cash and cash equivalents 3,468,469 2,657,148

Trade receivables, net 31,584,686 31,567,047

Other receivables, net 3,032,953 2,787,973

Other current financial assets 5,906,063 5,969,375

Non-trade receivables 39,574,362 39,032,631

Other non-current financial assets 998,945 991,274

Total financial assets 84,565,478 83,005,448

(a) Cash and Cash Equivalents

The management evaluates the financial condition of the banking industry and bank

deposits/investments are maintained with reputable banks only. For banks, only independently

rated parties with a minimum rating of “A” are accepted. The credit quality can be assessed by

reference to external credit ratings are as follows:

2 0 1 6 2 0 1 5

US$ US$

Counterparties with external credit rating:

- Fitch:

F1+ 2,501,277 1,496,346

F3 509,698 216,633

- Pefindo:

idAAA 288,652 746,281

idAA+ 72,403 113,647

3,372,030 2,572,907

Counterparties without external credit rating 96,439 84,241

Total cash and cash equivalents 3,468,469 2,657,148





115



(b) Trade Receivables

Majority of the Company and its Subsidiaries’ credit risk on receivables is attributed to its

activities influenced mainly by the individual characteristics of each customer and non-interest

bearing advances made to the Company and its Subsidiaries with similar operations. The

demographics of the Company and its Subsidiaries’ customer base, including the default risk of

the industry and regions in which customers operate, has an influence on credit risk.

In respect of trade receivables, the Company and its Subsidiaries are not exposed to any significant

credit risk exposure to any single counterparty or any group of counterparties having similar

characteristics. Trade receivables consist of a large number of customers. Based on historical

information, the customer default rates in the settlement of receivables is low due to the settlement

from customers are normally received by the Company and its Subsidiaries with the credit term.

Moreover, some of export sales are on cash before delivery or a portion of the sales are collected

a front (prefinance). Thus, the management noted that the outstanding of trade receivables have

not impaired.

The Board of Director has established a credit policy under which each advanced amount

requested by new customer/counterparties is analyzed individually for creditworthiness before

standard credit terms and conditions are granted.

The Company and its Subsidiaries’ review includes the requirements of updated credit application

documents, credit verifications through the use of no negative record requests and list of

blacklisted accounts, and analyses of financial performance to ensure credit capacity. The status

of each account is first checked before advances are approved.

The credit quality of financial assets that are neither past due or impaired, and past due but not

impaired can be assessed by reference to historical information about counterparty default rates.

2 0 1 6 2 0 1 5

Gross Amount Impairment Gross Amount Impairment

Counterparties without

external credit rating:

Group 1 31,377,066 − 30,254,675 –

Group 2 207,620 − 1,312,372 –

Group 3 15,657,945 15,657,945 15,657,945 15,657,945

Total 47,242,631 15,657,945 47,224,992 15,657,945





116



(b) Trade Receivables (Continued)

Group 1 –customers / related parties (less than six months).

Group 2 –customers / related parties (more than six months) with no defaults in the past.

Group 3 –customers / related parties (more than six months) with some defaults in the past.

As of reporting date, there were no significant concentrations of credit risk.

Based on historical default rates, the Company and its Subsidiaries believe that no impairment

allowance is necessary in respect of receivables in Group 1 and Group 2 not past due or past due

can be collected.

(c) Other receivables

In respect of other receivables, the Company and its Subsidiaries are not exposed to any significant

credit risk exposure to any single counterparty or any group of counterparties having similar

characteristics. Based on historical information about customer default rates, management

consider the credit quality of other receivables in Group 1 and Group 2 have not impaired.

The credit quality of financial assets that are neither past due or impaired, and past due but not

impaired can be assessed by reference to historical information about counterparty default rates.

2 0 1 6 2 0 1 5

Gross Amount Impairment Gross Amount Impairment

Counterparties without

external credit rating:

Group 1 1,693,518 − 1,547,695 –

Group 2 226,186 − 145,600 –

Group 3 68,751,004 67,637,756 68,732,434 67,637,756

Total 70,670,708 67,637,756 70,425,729 67,637,756

Group 1 – customers / related parties (less than six months).

Group 2 – customers / related parties (more than six months) with no defaults in the past.

Group 3 – customers / related parties (more than six months) with some defaults in the past.





117



(d) Non-trade receivables

Non-trade receivables represent the receivables from PT Multikarsa Investama. The Company and

its Subsidiaries’ management stated that there is no impairment indication that could be counted

from the estimated cash flow in the future, due to PT Multikarsa Investama is still in the debt

restructuring process with PT Perusahaan Pengelola Aset (PPA). In addition, the said value will

be suitably adjusted at the time of restructuring.

(e) Other non-current financial assets

The Company and its Subsidiaries’ management noted that there is no impairment indication in

the restricted cash in banks that could be counted from the estimated cash flow in the future, due

to the Company and its Subsidiaries are still in the debt restructuring process with PT Perusahaan

Pengelola Aset (PPA). In addition, the said amount will be suitably adjusted at the time of

restructuring.

b. Liquidity Risk

Liquidity risk pertains to the risk that the Company and its Subsidiaries will encounter difficulty in

meeting obligations associated with financial liabilities that are settled by delivering cash or another

financial asset.

The Company and its Subsidiaries manage liquidity risk by forecasting projected cash flows and

maintaining a balance between continuity of funding and flexibility. Treasury controls and procedures

are in place to ensure that sufficient cash is maintained to cover daily operational and working capital

requirements.

Management closely monitors the Company and its Subsidiaries’ future and contingent obligations

and sets up required cash reserves as necessary in accordance with internal requirements.





118


b. Liquidity Risk

The following are the contractual maturities of financial liabilities, including estimated interest

payments and excluding the impact of netting agreements of the Company and its Subsidiaries:

Current Non Current

Within 6 to 12 1 to 5 More than

6 months months Years 5 years

US$ US$ US$ US$

December 31, 2016:

Trade payables 11,986,713 − − −

Accrued expenses 56,917,886 − − −

Bank Loans 85,729,859 − − −

Secured Debts 947,993,133 − − −

Unsecured Debts and

Notes payable

− −

6,354,339 18,670,630

Working Capital Loans − − 23,570,000 −

Credit Financing Payables 20,859 20,859 − −

Other short-term

financial liabilities

5,350,242

−

−

−

Total 1,107,998,692 20,859 29,924,339 18,670,630

December 31, 2015:

Trade payables 12,241,858 − − −

Accrued expenses 50,446,641 − − −

Bank Loans 88,135,716 − − −

Secured Debts 945,081,879 − − −

Unsecured Debts and

Notes payable

−

−

5,526,320

18,506,316

Working Capital Loans − − 22,070,000 −

Credit Financing Payables 20,210 21,169 5,940

Other short-term


5,357,542

−

−

−

Total 1,101,283,846 21,169 27,602,260 18,506,316





119


c. Market Risks

Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates, and

other market prices will affect the Company and its Subsidiaries’ income or the value of its holdings

of financial instruments. The objective of market risk management is to manage and control market

risk exposures within acceptable parameters, while optimizing the return.

The Company and its Subsidiaries are subject to various market risks, including risks from interest

rates, and currency exchange rates.

(1) Interest Rate Risk

Interest rate risk is the impact of rate changes on interest bearing assets and liabilities. The interests

risk exposure is mainly from changes in fixed rate and floating interest rates. When considered

appropriate, in order to manage the interest rate risk, interest rate swaps are entered into to mitigate

the fair value risk relating to fixed-interest assets or liabilities and the cash flow risk related to

variable interest rate assets and liabilities.

The Company and its Subsidiaries’ policy are to minimize interest rate risk exposure on long-term

financing. Longer-term borrowings are therefore usually at fixed rates. At December 31, 2016 and

2015, the Company and its Subsidiaries have applied the fixed interest rates for their loans to

banks, third parties and related parties, so there is no interest rate risk exposure in the Company

and its Subsidiaries.

(2) Foreign Currency Risks

Most of the Company and its Subsidiaries’ transactions are carried out in other currencies.

Exposure to currency exchange rates arise from the Company and its Subsidiaries’ operational

activities, which are denominated in Indonesian Rupiah and currencies other than United States

Dollar.

The Company and its Subsidiaries are aware of the market risk due to foreign exchange

fluctuation. Management has set up a policy to require Company and its Subsidiaries to manage

their foreign exchange risk against their functional currency. There are no specific arrangements

to reduce such risk exposures through derivatives and other hedging instruments. Foreign

exchange risk arises when future commercial transactions or recognized assets or liabilities are

denominated in a currency that is not the Company and its Subsidiaries’ functional currency.

To mitigate the Company and its Subsidiaries’ exposure to foreign currency risk, the Company

and its Subsidiaries actively monitors the foreign currency movements and together with principal

to manage the impact of the foreign exchange fluctuations. Foreign currency denominated

financial assets and liabilities, translated into United States Dollar at the middle rate, are stated in

Assets and Liabilities in Foreign Currency (Note 47).





120


c. Market Risks (Continued)

(2) Foreign Currency Risks (Continued)

The management believes that the Company and its Subsidiaries are naturally hedged against

foreign exchange risk. The risk is measured using cash flow forecasts with sensitivity analysis.

The table below summarizes the sensitivity analysis to the possibility changes of foreign exchange

rates, with considering all other factors are held constant, to the consolidated statements of profit

or loss and other comprehensive income for the year ended December 31, 2016:

2 0 1 6

US$

IDR decreased by 0.32% 547,077

EUR increased by 0.16% (24,987 )

YEN decreased by 0.16% (272,637 )

NOK increased by 0.11% (1 )

SGD increased by 1.41% 74

CHF increased by 0.40% (55 )

Net loss 249,471

Management conducted a survey among banks to get an estimate on exchange rate of foreign

currencies until the reporting date. The estimate changes of foreign exchange rate are decreased

by 0.32% for Indonesia Rupiah and 0.16% for Japanese Yen. And the estimate changes of foreign

exchange rate are increased by 0.16% for European Euro, 0.11% for Krona Norwegia, 1.41% for

Singapore Dollar, and 0.40% for Swiss Franc if compared with the exchange rate on

December 31, 2016.

The Company and its Subsidiaries’ policy is to manage the financial assets denominated in foreign

currencies are available to settle the financial liabilities denominated in foreign currencies. At

December 31, 2016, the financial liabilities denominated in foreign currencies are in excess of

financial assets denominated in foreign currencies at amount of US$ 110,555,914 due to un-

restructured long-term secured debts are shown in their full value. If the above mentioned secured

debts denominated in Indonesian Rupiah and currencies other than US Dollar are not considered,

there are no excess of financial liabilities over the assets. This is a manageable level as the loans

are repayable over a period of time.

Financing Arrangements

The Company has letter of credit facility from Deutsche Bank totaling of US$ 100,000,000. The facility

is available on various periods up to December 31, 2016. As of December 31, 2016, the unused portion

was US$ 94,630,740.





121


Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and

measurement or for disclosure purposes.

PSAK 60, “Financial Instruments: Disclosures” requires disclosure of fair value measurements by level

of the following fair value measurement hierarchy:

1. Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

The fair value of financial instrument traded in active markets is based on quoted market prices at the

reporting date. The quoted market price used is the current bid price, while financial liabilities use ask

price.

2. Inputs other than quoted prices included within level 1 that are observable for the assets or liability,

either directly (as prices) or indirectly (derived from prices) (level 2), and

The fair value of financial instruments that are not traded in active market (such as derivative over-

the-counter) is determined using valuation techniques. These valuation techniques maximize the use

of observable market data where it is available and rely as little as possible on estimates. If all

significant inputs required to fair value an instrument are observable, the instrument is included in

level 2.

3. Inputs for the asset and liability that are not based on observable market data (unobservable inputs)

(level 3).

If one or more of the significant inputs is not based on observable market data, the instrument is

included in level 3.

Specific valuation techniques used to value financial instruments include:

(a) The use of quoted market prices or dealer quotes for similar instruments, and

(b) Other techniques, such as discounted cash flow analysis, are used to determine fair value for the

remaining financial instruments.

The Company and its Subsidiaries’ financial assets and liabilities are measured and recognized using the

fair value measurement of level 2 and 3.





122


Fair value estimation (Continued)

The fair values of financial assets and liabilities together with the carrying amounts are as follows:

December 31, 2016 December 31, 2015

Carrying amount Fair value Carrying amount Fair value

US$ US$ US$ US$

Financial assets:

Current Assets:

Cash and cash equivalents 3,468,469 3,468,469 2,657,148 2,657,148

Trade receivables, net 31,584,686 31,584,686 31,567,047 31,567,047

Other receivables, net 3,032,953 3,032,953 2,787,973 2,787,973

Other current financial assets 5,906,063 5,906,063 5,969,375 5,969,375

Non-current assets:

Non-trade receivables 39,574,362 39,574,362 39,032,631 39,032,631


Assets 998,945 998,945 991,274 991,274

Total financial assets 84,565,478 84,565,478 83,005,448 83,005,448

Financial liabilities:

Current Liabilities:

Trade payables 11,986,713 11,986,713 12,241,858 12,241,858

Accrued expenses 56,917,886 56,917,886 50,446,641 50,446,641

Bank Loans 85,729,859 85,729,859 88,135,716 88,135,716

Secured Debts 947,993,134 947,993,134 945,081,879 945,081,879

Current portion of long-

term liabilities:

Credit financing payables 41,718 − 41,379 −

Other short-term


5,350,242

5,350,242

5,357,542

5,357,542

Non-current:

Unsecured Debts

and Notes Payable 25,024,969 22,336,237 24,032,636 20,900,635

Working capital loans 23,570,000 21,603,828 22,070,000 20,914,617

Credit financing payables 67,977 67,977 5,940 5,940

Total financial liabilities 1,156,682,498 1,151,985,876 1,147,413,591 1,143,084,828

Short-term financial assets and liabilities with remaining maturities of one (1) year or less (cash and cash

equivalents, trade receivables, other receivables, other current financial assets, trade payables, accrued

expenses, and other short-term financial liabilities). The net carrying value of these financial assets and

liabilities is considered a reasonable approximation of their fair value due to their short-term maturities.





123



Long-term fixed-rate financial instruments with remaining maturities are over one (1) year. The fair value

of these financial assets and liabilities is determined by discounting future cash flows using applicable

interest rates from observable current market transactions for instruments with similar terms, credit risk

and remaining maturities.

Based on the above different level from fair value hierarchy, the following table represents the Company’s

assets and liabilities that are measured at fair value as of December 31, 2016 and 2015:

December 31, 2016

Level 1 Level 2 Level 3 Total

US$ US$ US$ US$

Financial assets:

Current Assets:

Cash and cash equivalents − 3,468,469 − 3,468,469

Trade receivables, net − 31,584,686 − 31,584,686

Other receivables, net − 3,032,953 − 3,032,953

Other current financial assets − 5,906,063 − 5,906,063

Non-current assets:

Non-trade receivables from

related parties − − 39,574,362 39,574,362


assets − − 998,945 998,945

Total financial assets − 43,992,171 40,573,307 84,565,478



Trade payables − 11,986,713 − 11,986,713

Accrued expenses − 56,917,886 − 56,917,886

Bank Loans − 85,729,859 − 85,729,859

Secured Debts − 947,993,134 − 947,993,134


term liabilities:

Credit financing payables − − − −

Other short-term


−

5,350,242

−

5,350,242

Non-current:

Unsecured Debts

and Notes Payable − 22,336,237 − 22,336,237

Working capital loans − 21,603,828 − 21,603,828

Credit financing payables − 67,977 − 67,977

Total financial liabilities − 1,151,985,876 − 1,151,985,876





124



December 31, 2015

Level 1 Level 2 Level 3 Total

US$ US$ US$ US$

Financial assets:

Current Assets:

Cash and cash equivalents − 2,657,148 − 2,657,148

Trade receivables, net − 31,567,047 − 31,567,047

Other receivables, net − 2,787,973 − 2,787,973

Other current financial assets − 5,969,375 − 5,969,375

Non-current assets:

Non-trade receivables − − 39,032,631 39,032,631


assets − − 991,274 991,274

Total financial assets − 42,981,543 40,023,905 83,005,448



Trade payables − 12,241,858 − 12,241,858

Accrued expenses − 50,446,641 − 50,446,641

Bank Loans − 88,135,716 − 88,135,716

Secured Debts − 945,081,879 − 945,081,879


term liabilities:

Credit financing payables − − − −

Other short-term


−

5,357,542

−

5,357,542

Non-current:

Unsecured Debts

and Notes Payable − 20,900,635 − 20,900,635

Working capital loans − 20,914,617 − 20,914,617

Credit financing payables − 5,940 − 5,940

Total financial liabilities − 1,143,084,828 − 1,143,084,828

The following table presents the changes in Level 3 instruments are as follows:

Non-trade Other

receivables non-current

from related financial Secured

parties assets debts Total

US$ US$ US$ US$

Beginning balance 19,552,932 991,274 (945,081,879 ) (924,537,673 )

Gain (loss) on foreign

exchange, net

649,898

7,670

(2,911,255

)

(2,253,687

)

Settlement of tolling expenses (628,650 ) − − (628,650 )

Ending balance 19,574,180 998,944 (947,993,134 ) (927,420,010 )





125


Capital risk management

The Company and its Subsidiaries’ objective when managing capital is to safeguard the Company and its

Subsidiaries’ ability to continue as a going concern in order to provide returns for shareholders and benefits

for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The

Company and its Subsidiaries actively and regularly reviews and manages its capital structure to ensure

optimal capital structure and shareholder returns, taking into consideration the future capital requirements

and capital deficiency of the Company and its Subsidiaries, prevailing and projected profitability, projected

operating cash flows, projected capital expenditures and projected strategic investment opportunities. In

order to maintain or adjust the capital structure, the Company and its Subsidiaries may from time to time

adjust the amount of issue new shares or increase/reduce debt levels.

Consistent with others in the industry, the Company and its Subsidiaries monitor capital on the basis of

the gearing ratio. The gearing ratio as of December 31, 2016 and 2015 are as follows:

2 0 1 6 2 0 1 5

US$ US$

Total borrowings 1,082,317,961 1,079,320,231

Less:

Cash and cash equivalents (3,468,467 ) (2,657,148 )

Other current financial assets (5,906,060 ) (5,969,375 )

Other non-current financial assets (998,944 ) (991,274 )

Net debt 1,071,944,490 1,069,702,434

Total deficiency (937,566,161 ) (925,406,725 )

Gearing ratio (0.87 ) (0.86 )

The total borrowings include the unrestructured secured debts of US$ 947,993,134. The Company

endevours to restructure this debt to a sustainable level and for which the negotiations are underway with

its secured creditors including PPA/BPP. If the proposal of the Company which includes debt to equity

swap and waiver of the past interest amounts is accepted by its creditors, it will considerably improve the

capital gearing structure of the Company and its Subsidiaries.

49. EVENTS AFTER THE REPORTING PERIOD

On February 27, 2017, the Company received a letter from the Indonesian Tax Authorities

No. S-161 / PJ.05 / 2017 as a continuance of the Evidence Preliminary Examination of one of the

Company’s customer. Due to the Evidence Preliminary Examination, all of the tax examination

relation of Value Tax Added refunds for the period from July 2015 until April 2016 is postponed for

a while.





126

49. EVENTS AFTER THE REPORTING PERIOD (Continued)

On March 6, 2017, PT Asia Pacific Fibers Tbk established a wholly owned subsidiary Asia Pacific

Fibers Hong Kong Limited, a private limited company established under the laws of the Hong Kong

Special Administrative Region (“HKSAR”) with corporate registration number 2493881 and its

registered office in Hongkong.

This is intended to facilitate the restructuring of the Secured Bonds through the scheme of

arrangement. The Company will report suitably in future any action in takes through the Subsidiary in

the process restructuring to the regulator.

50. NEW PROSPECTIVE ACCOUNTING STANDARDS

The Indonesian Financial Accounting Standards Board (“DSAK”) has issued new on amendment of the

following the Indonesian financial Accounting Standards (“PSAK”) and Its Interpretation (“ISAK”), the

accounting standards will be effective or applicable on the Company financial statements for the period

beginning or on after January 1, 2017:

- PSAK 69 : Agriculture

- Amendment PSAK 1 : Presentation of Financial Statement

- ISAK 31 (revised 2015 ) : Interpretation of Scope PSAK 13: Investment Property

- Amendment PSAK 16 : Property, Plant and Equipment

As at the authorization date of this financial statements, the Company’s management is still evaluating

the potential impact of these new and revised standards to the Company’s financial statements.

51. ACCOUNT RECLASSIFICATIONS

Certain accounts in the 2015 and 2014 consolidated financial statements have been reclassified in line with

the presentation of the 2016 consolidated financial statements. The details is a follows:

December 31, 2015

As previously

presented

Reclassification

As

reclassified

US$

Statements of financial position

Trade receivables – Related party 19,479,699 (19,479,699 ) – Non-trade receivables – Related party 19,552,932 (19,552,932 ) – Non-trade receivables – Third party – 39,032,631 39,032,631

52. SUPPLEMENTARY FINANCIAL INFORMATION

The Company published consolidated financial statements. The supplementary financial information of

PT Asia Pacific Fibers Tbk (Parent Entity only) in appendix 1 until appendix 6 that has been prepared in

order to analyze Parent Entity only’s result of operations. The following supplementary financial

information of PT Asia Pacific Fibers Tbk (Parent Entity only) should be read in conjuction with the

consolidated financial statements of PT Asia Pacific Fibers Tbk and its Subsidiaries.

Appendix -1


(PARENT ENTITY ONLY)

ADDITIONAL FINANCIAL INFORMATION

STATEMENTS OF FINANCIAL POSITION


December 31,

2 0 1 6

December 31,

2 0 1 5 *)

January 1,

2 0 1 5/

December 31,

2014*)

US$ US$ US$

ASSETS

CURRENT ASSETS

Cash and cash equivalents 3,447,893 2,636,572 6,163,518 Trade receivables, net after allowance for


and 2014

Third parties 31,584,686 31,567,047 41,190,159

Related parties – – –

Other receivables, net after allowance for

impairment of US$ 67,637,756 in 2016 and 2015

Third parties 3,032,953 2,787,973 3,426,117

Other current financial assets 5,906,060 5,969,375 8,693,988

Inventories 59,691,450 61,164,596 75,507,062

Purchase advances

Third parties 2,330,122 6,076,917 2,338,194

Related parties – – 56,031

Prepaid taxes 10,178,297 11,419,541 15,902,785

Prepaid expenses 1,828,659 2,128,943 2,520,486

Total Current Assets 118,000,120 123,750,964 155,798,340

NON–CURRENT ASSETS

Non-trade receivables, net of allowance

for impairment of US$ 111,962,653 in 2016,

2015, and 2014

Third parties 42,239,907 41,698,176 47,959,683

Related party – – –

Other non-current financial assets 998,945 991,274 1,022,539

Property, plant and equipment, net after

accumulated depreciation of US$ 1,713,765,001

in 2016 and US$ 1,709,106,418 in 2015, and

US$ 1,703,166,009 in 2014 69,647,040 61,876,082 61,365,864

Intangible Assets 107,319 113,590 119,866

Investment in subsidiaries 31,170 31,170 31,170

Deferred tax assets 2,801,154 6,710,119 11,750,587

Total Non–Current Assets 115,825,535 111,420,411 122,249,709

TOTAL ASSETS 233,825,655 235,171,375 278,048,049

*) As reclassified

Appendix -2


(PARENT ENTITY ONLY) ADDITIONAL FINANCIAL INFORMATION

STATEMENTS OF FINANCIAL POSITION (Continued)


December 31,

2 0 1 6

December 31,

2 0 1 5 *)

January 1,

2 0 1 5/

December 31,

2014*)

US$ US$ US$

LIABILITIES AND EQUITY (DEFICIENCY)

CURRENT LIABILITIES

Trade payables

Third parties 11,986,713 12,241,858 25,584,407

Accrued expenses 56,917,886 50,446,641 49,969,699

Taxes payable 145,695 149,767 159,621

Bank Loans 85,729,859 88,135,716 88,250,457

Short – term employee benefit liabilities 947,993,134 366,276 433,562

Secured Debts 532,715 945,081,879 957,675,5255

Current portion of long-term liabilities:

Credit financing payables 32,003 41,379 56,131

Other short-term financial liabilities 5,275,311 5,282,611 4,641,863

Total Current Liabilities 1,108,613,316 1,101,746,127 1,126,771,265

NON–CURRENT LIABILITIES

Borrowing from Other Financial

Institutions:

Unsecured Debts and Notes Payable 25,024,969 24,032,636 23,082,193

Working capital loans 23,570,000 22,070,000 22,070,000

Credit financing payables 77,692 5,940 47,253

Deferred revenues 199,962 212,526 225,089

Long-term employee benefit liabilities 11,154,807 9,759,801 12,125,149

Total Non–Current Liabilities 60,027,430 56,080,903 57,549,684

Total Liabilities 1,168,640,746 1,157,827,030 1,184,320,949

*) As reclassified

Appendix -3




STATEMENTS OF FINANCIAL POSITION (Continued)


December 31,

2 0 1 6

December 31,

2 0 1 5 *)

January 1,

2 0 1 5/

December 31,

2014*)

US$ US$ US$

LIABILITIES AND EQUITY (DEFICIENCY)

EQUITY (DEFICIENCY)

Share Capital

Authorized 12,357,255,000 shares at Rp 10.000 par value per Series A, Rp 1.000 par value

per Series B and Rp 40 par value per Series C in 2016, 2015, and 2014

Issued and paid up 219,696,000 Series A and

2,276,057,347 Series C in 2016, 2015, and 2014 635,689,316 635,689,316 635,689,316

Additional paid-in capital 624,344,507 624,344,507 624,344,507

Retained earnings (accumulated deficit)

Appropriated 2,345,301 2,345,301 2,345,301

Unappropriated (2,197,194,215 ) (2,185,034,779 ) (2,168,652,024 )

Total Deficiency (934,815,091 ) (922,655,655 ) (906,272,900 )

TOTAL LIABILITIES AND

EQUITY (DEFICIENCY) 233,825,655 235,171,375 278,048,049

*) As reclassified

Appendix -4




STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


2 0 1 6 2 0 1 5

US$ US$

REVENUES

Net sales 355,748,940 387,053,770

Other operating revenues 4,731,812 3,002,226

Total revenues 360,480,752 390,055,996

COST OF GOODS SOLD (342,580,203 ) (381,902,793 )

GROSS LOSS 17,900,549 8,153,203

General and administrative expenses (15,386,149 ) (14,399,308 )

Finance costs (4,451,148 ) (7,863,850 )

Selling expenses (7,999,603 ) (10,786,487 )

Gain (loss) on foreign exchange transactions, net (3,884,345 ) 11,236,898

Insurance claim settlement, net 5,688,253 1,703,128

Gain on sale or disposal of property, plant and equipment 28,669 −

Miscellaneous income, net 1,125,033 309,069

(24,879,290 ) (19,800,550 )

LOSS BEFORE INCOME TAX (6,978,741 ) (11,647,347 )

TAX EXPENSE

Current period (883,641 ) (1,566,830 )

Deferred (4,005,987 ) (4,572,495 )

Total tax expense (4,889,628 ) (6,139,325 )

TOTAL LOSS FOR THE YEAR (11,868,369 ) (17,786,672 )

OTHER COMPREHENSIVE INCOME (LOSS),

NET AFTER TAX

Items that will not be reclassified to profit or loss:

Remeasurement of post employment benefit

Obligations (388,089 ) 1,871,890

Related income tax benefit (expense) 97,022 (467,973 )

Total Other Comprehensive Income (Loss), net of tax (291,067 ) 1,403,917

)

TOTAL COMPREHENSIVE LOSS FOR THE YEAR (12,159,436 ) (16,382,755 )

Total Net Loss Attributable to the Owners of the Company (11,868,369 ) (17,786,672 )

Total Comprehensive Loss Attributable to the Owners of the Company (12,159,436 ) (16,382,755 )

EARNING (LOSS) PER SHARE:

Basic (0.004 ) (0.006 )

Diluted (0.004 ) (0.006 )

Appendix -5



STATEMENTS OF CHANGES IN EQUITY


Retained Earnings

(Accumulated deficit)

Share Capital

Additional

paid-in capital

Appropriated

Unappropriated

Total equity

(deficiency)

US$ US$ US$ US$ US$



Other comprehensive income, net after tax – – – 1,403,917 1,403,917



Other comprehensive loss, net after tax (291,067 ) (291,067 )

– – –


Appendix -6



STATEMENTS OF CASH FLOWS


DRAFT

2 0 1 6 2 0 1 5

US$ US$

CASH FLOWS FROM OPERATING ACTIVITIES

Receipt from customers 359,942,630 401,800,894

Payment to suppliers (253,401,986 ) (288,202,470 )

Payment of salaries (8,830,852 ) (8,702,467 )

Other operating cash payments, net (88,909,037 ) (96,818,606 )

Cash provided by operations 8,800,755 8,077,351

Interest received 23,557 22,622

Interest expense and bank charges paid (3,824,705 ) (7,221,113 )

Cash receipt from insurance claim settlement 5,688,253 1,703,128

Payment of income tax (2,175,977 ) (4,475,260 )

Refund of income tax 5,426,618 4,747,807

Net Cash Provided By Operating Activities 13,938,501 2,854,535

CASH FLOWS FROM INVESTING ACTIVITIES

Payment to acquire property, plant and equipment (12,431,261 ) (6,450,627 )

Proceed from sale of property, plant and equipment 28,669 –

Net Cash Used In Investing Activities (12,402,592 ) (6,450,627 )

CASH FLOWS FROM FINANCING ACTIVITIES

Receipt of working capital loans 1,500,000 –

Payment of bank loans (2,405,857 ) (114,741 )

Payment of credit financing payables (69,829 ) (56,065 )

Net Cash Used In Financing Activities (975,686 ) (170,806 )

NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS

560,223

(3,766,898

)

EFFECT OF FOREIGN EXCHANGE RATE 251,098 239,952


AT BEGINNING OF YEAR

2,636,572

6,163,518


AT END OF YEAR

3,447,893

2,636,572

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