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MarketScreener Homepage  >  Equities  >  INDONESIA STOCK EXCHANGE  >  Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk    TLKM   ID1000129000

PERUSAHAAN PERSEROAN (PERSERO) PT TELEKOMUNIKASI INDONESIA TBK

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Perusahaan Perseroan Persero PT Telekomunikasi Indonesia Tbk : Financial Statements (Unaudited) 3Q 2020

11/04/2020 | 03:10am EST

Perusahaan Perseroan (Persero)

PT Telekomunikasi Indonesia Tbk. and its subsidiaries

Consolidated financial statements

as of September 30, 2020 and for nine months period then ended (unaudited)

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020 AND FOR THE NINE MONTHS PERIOD THEN ENDED

(UNAUDITED)

TABLE OF CONTENTS

Page

Statement of the Board of Directors

Consolidated Statement of Financial Position

1

Consolidated Statement of Profit or Loss and Other Comprehensive Income

2

Consolidated Statement of Changes in Equity

3-4

Consolidated Statement of Cash Flows

5

Notes to the Consolidated Financial Statements

6-134

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As of September 30, 2020 (unaudited) and December 31, 2019 (audited)

ASSETS

Notes

September 30, 2020

December 31, 2019

CURRENT ASSETS

Cash and cash equivalents

2e,2u,3,33,38

17,420

18,242

Other current financial assets

2e,2u,4,33,38

383

554

Trade receivables - net provision for

impairment of receivables

Related parties

2u,2ae,5,38

1,151

1,792

Third parties

33

11,570

10,005

Contract assets

2r,2u,2ae,6,38

822

-

Other receivables - net of provision for

impairment of receivables

2u,38

237

292

Inventories - net provision for obsolescence

7

1,026

585

Assets held for sale

11

39

39

Contract cost

2ae,9

441

-

Prepaid taxes

2t,28a

3,224

2,569

Claim for tax refund

2t,28b

804

992

Other current assets

8,33

3,560

6,652

Total Current Assets

40,677

41,722

NON-CURRENT ASSETS

Long-term investments

2u,10

2,052

1,944

Property and equipment - net of accumulated depreciation

2ab,11,36

156,641

156,973

Right of use assets

2ae,12

17,760

-

Intangible assets - net of accumulated amortization

2n,2ab,14

6,702

6,446

Deferred tax assets - net

2t,2ae,28f

2,975

2,898

Contract assets

2u,2ae,6,38

295

-

Contract cost

2ae,9

1,312

-

Other non-current assets

2t,2u,13,28,33,38

4,805

11,225

Total Non-current Assets

192,542

179,486

TOTAL ASSETS

233,219

221,208

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Trade payables

Related parties

2u,15,38

818

819

Third parties

33

13,766

13,078

Other payables

2u,38

520

449

Taxes payable

2t,28c

3,532

3,431

Accrued expenses

2u,16,33,38

13,684

13,736

Unearned income - current

2r

631

7,352

Contract liabilities

17a

6,801

-

Advances from customers

2c,33

2,010

1,289

Short-term bank loans

2p,2u,18a,33,38

9,515

8,705

Current maturities of long-term borrowings

2m,2p,2u,2v,18b,33,38

12,209

9,510

Total Current Liabilities

63,486

58,369

NON-CURRENT LIABILITIES

Deferred tax liabilities - net

2t,2ae,28f

749

1,230

Unearned income - net off current portion

2r

-

803

Contract liabilities

2r,2ae,17b

1,025

-

Long service award provisions

2s,32

1,124

1,066

Pension benefits and other post-employment

benefits obligations

2s,31

8,522

8,078

Long-term borrowings - net of current maturities

2m,2p,2u,2v,19,33,38

40,044

33,869

Other liabilities

2o,2u

380

543

Total Non-current Liabilites

51,844

45,589

TOTAL LIABILITIES

115,330

103,958

EQUITY

Capital stock

1c,21

4,953

4,953

Additional paid-in capital

2w,22

2,711

2,711

Other equity

2f,2u,23

541

408

Retained earnings

Appropriated

30

15,337

15,337

Unappropriated

78,175

76,152

Net equity attributable to:

Owners of the parent company

101,717

99,561

Non-controlling interest

20

16,172

17,689

TOTAL EQUITY

117,889

117,250

TOTAL LIABILITIES AND EQUITY

233,219

221,208

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

1

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

REVENUES

Notes

2020

2019

2c,2r,24,33

99,941

102,631

Operation, maintenance and telecommunication

service expenses

2c,2r,26,33

(25,098)

(31,056)

Depreciation and amortization expenses

2k,2l,2m,11,12,14

(21,038)

(17,259)

Personnel expenses

2c,2r,2s,25,33

(10,406)

(9,744)

Interconnection expenses

2c,2r,33

(4,261)

(3,920)

General and administrative expenses

2c,2r,27,33

(4,234)

(4,932)

Marketing expenses

2c,2r,33

(2,356)

(2,949)

Losses on foreign exchange - net

2q

(2)

(58)

Other income - net

2l,2r

465

741

OPERATING PROFIT

33,011

33,454

Finance income

2c,33

644

882

Finance cost

2c,2p,2r,33

(3,457)

(3,219)

Share of loss of associated companies - net

2f,10

(136)

(3)

Impairment of long term investment in associated companies

(308)

-

PROFIT BEFORE INCOME TAX

29,754

31,114

INCOME TAX (EXPENSE) BENEFIT

2t,2ae,28

Current

(7,378)

(8,196)

Deferred

575

282

(6,803)

(7,914)

PROFIT FOR THE PERIOD

22,951

23,200

OTHER COMPREHENSIVE INCOME

Other comprehensive income to be reclassified to profit

or loss in subsequent periods:

Foreign currency translation

2f,2q,23

181

(61)

Change in fair value of available-for-sale financial assets

2u,23

-

4

Share of other comprehensive income of associated companies

2f,10

-

39

Other comprehensive income not to be reclassified to profit

or loss in subsequent periods:

Defined benefit actuarial gain (losses) - net

2s,31

-

-

Other comprehensive income (losses) - net

181

(18)

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

23,132

23,182

Profit for the period attributable to:

Owners of the parent company

16,679

16,459

Non-controlling interests

2b,20

6,272

6,741

Total comprehensive income for the period attributable to:

22,951

23,200

Owners of the parent company

16,860

16,441

Non-controlling interests

2b

6,272

6,741

BASIC EARNING PER SHARE

23,132

23,182

(in full amount)

2y,29

Net income per share

168.37

166.15

Net income per ADS (100 Series B shares per ADS)

16,836.89

16,614.81

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

2

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited) (Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

Attributable to owners of the parent company

Additional

Retained earnings

Non-controlling

Description

Notes

Capital stock

paid-in capital

Other equity

Appropriated

Unappropriated

Net

interests

Total equity

Balance, December 31, 2019

4,953

2,711

408

15,337

76,152

99,561

17,689

117,250

The impact of applying new accounting standards

2ad

-

-

(48)

-

606

558

(50)

508

Balance, January 1, 2020

4,953

2,711

360

15,337

76,758

100,119

17,639

117,758

Adjustment of non-controlling interest

-

-

-

-

-

-

(14)

(14)

Cash dividends

20,30

-

-

-

-

(15,262)

(15,262)

(7,725)

(22,987)

Profit for the period

2b,20

-

-

-

-

16,679

16,679

6,272

22,951

Other comprehensive income

2f,2q,2s,2u,20

-

-

181

-

-

181

-

181

Balance, September 30, 2020

4,953

2,711

541

15,337

78,175

101,717

16,172

117,889

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

3

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited) (Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

Attributable to owners of the parent company

Additional

Retained earnings

Non-controlling

Description

Notes

Capital stock

paid-in capital

Other equity

Appropriated

Unappropriated

Net

interests

Total equity

Balance, January 1, 2019

4,953

2,455

507

15,337

75,658

98,910

18,393

117,303

Capital contribution to subsidiaries

-

-

-

-

-

-

59

59

Transaction under common control

-

249

-

-

-

249

170

419

Divestment of subsidiaries

-

226

-

-

-

226

-

226

Acquisition of non-controlling interest

-

-

(3)

-

-

(3)

27

24

Cash dividends

20.30

-

-

-

-

(16,229)

(16,229)

(8,538)

(24,767)

Profit for the period

2b,20

-

-

-

-

16,459

16,459

6,741

23,200

Other comprehensive income

2f,2q,2s,2u,20

-

-

(57)

-

39

(18)

-

(18)

Balance, September 30, 2019

4,953

2,930

447

15,337

75,927

99,594

16,852

116,446

The accompanying notes to the consolidated financial statements, form an integral part ofthese consolidated financial statements taken as a whole.

4

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Nine Months Period Ended September 30, 2020 and 2019(unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

CASH FLOWS FROM OPERATING ACTIVITIES

Notes

2020

2019

Total cash receipts from customers and other operators

96,087

98,450

Cash receipts from tax refund

2,912

-

Cash receipts from finance income

652

882

Cash payments for expenses

(29,152)

(43,984)

Cash payments to employees

(9,832)

(9,404)

Cash payments for corporate and final income taxes

(7,625)

(6,254)

Cash payment for finance costs

(3,541)

(3,264)

Cash payments for short-term and low-value lease asset

(2,065)

-

Cash payments for value added taxes - net

(35)

1,531

Cash receipts from others - net

49

306

Net cash provided by operating activities

47,450

38,263

CASH FLOWS FROM INVESTING ACTIVITIES

Redemption in other current financial assets - net

274

714

Proceeds from insurance claims

11

218

95

Proceeds from sale of property and equipment

11

141

1,261

Dividends received from associated companies

10

5

11

Purchase of property and equipment

11,40

(17,538)

(21,563)

Purchase of intangible assets

14,40

(1,916)

(1,424)

Additional contribution on long-term investments

10

(458)

(225)

Decreases in advances and other assets - net

(16)

(289)

Proceeds from divestment of subsidiaries

-

395

Acquisition of businesses, net of acquired cash

-

(1,108)

Net cash used in investing activities

(19,290)

(22,133)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from bank loans and other borrowings

18,19

17,629

21,744

Repayments of loan and other borrowings

18,19

(19,291)

(15,422)

Cash dividends paid to the Company's stockholder

30

(15,262)

(16,229)

Cash dividends paid to non-controlling interests of subsidiaries

(7,725)

(8,538)

Repayment of principal portion of lease liabilities

(4,541)

-

Capital contribution from non-controling interests of subsidiaries

-

59

Net cash used in financing activities

(29,190)

(18,386)

NET DECREASE IN CASH AND CASH

EQUIVALENTS

(1,030)

(2,256)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND

CASH EQUIVALENTS

208

(166)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

3

18,242

17,439

CASH AND CASH EQUIVALENTS AT END OF PERIOD

3

17,420

15,017

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

5

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

1. GENERAL

  1. Establishment and general information
    Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk. (the "Company") was originally part of "Post en Telegraafdienst", which was established and operated commercially in 1884 under the framework of Decree No. 7 dated March 27, 1884 of the Governor General of the Dutch Indies. Decree No. 7 was published in State Gazette No. 52 dated April 3, 1884.
    In 1991, the status of the Company was changed into a state-owned limited liability corporation ("Persero") based on Government Regulation No. 25/1991. The ultimate parent of the Company is the Government of the Republic of Indonesia (the "Government") (Notes 1c and 21).
    The Company was established based on notarial deed No. 128 dated September 24, 1991 of Imas Fatimah, S.H. The deed of establishment was approved by the Ministry of Justice of the Republic of Indonesia in its Decision Letter No. C2-6870.HT.01.01.Th.1991 dated November 19, 1991 and was published in State Gazette No. 5 dated January 17, 1992, Supplement No. 210. The Articles of Association has been amended several times, the latest amendments of which were pertaining to the increase in the flexibility and independency of the Board Commissioners in approving the Directors' actions at a certain threshold as stated in notarial deeds No. 32 dated June 21, 2019 of Ashoya Ratam, S.H., M.Kn. Such amendments were accepted and approved by the Ministry of Law and Human Rights of the Republic of Indonesia ("MoLHR") in its letter No. AHU- 0032595.AH.01.02 dated June 24, 2019.
    In accordance with Article 3 of the Company's Articles of Association, the scope of its activities is to provide telecommunication network and telecommunication and information services, and to optimize the Company's resources to provide high quality and competitive goods and/or services to gain/pursue profit in order to increase the value of the Company with applied the Limited Company principle. In regard to achieving its objectives, the Company is involved in the following activities:
    1. Main business:
      1. Planning, building, providing, developing, operating, marketing or selling or leasing, and maintaining telecommunications and information networks in a broad sense in accordance with prevailing regulations.
      2. Planning, developing, providing, marketing or selling, and improving telecommunications and information services in a broad sense in accordance with prevailing regulations.
      3. Investing including equity capital in other companies in line with achieving the purposes and objectives of the Company.
    2. Supporting business:
      1. Providing payment transactions and money transferring services through telecommunications and information networks.
      2. Performing activities and other undertakings in connection with the optimization of the Company's resources, which among others, include the utilization of the Company's property and equipment and moving assets, information systems, education and training, repairs and maintenance facilities.
      3. Collaborating with other parties in order to optimize the information, communication or technology resources owned by other parties as service provider in information, communication and technology industry as to achieve the purposes and objectives of the Company.

The Company's head office is located at Jalan Japati No. 1, Bandung, West Java.

6

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

1. GENERAL (continued)

  1. Establishment and general information (continued)
    The Company was granted several networks and/or services licenses by the Government which are valid for an unlimited period of time as long as the Company complies with prevailing laws and fulfills the obligation stated in those licenses. For every license issued by the Ministry of Communication and Information ("MoCI"), an evaluation is performed annually and an overall evaluation is performed every five years. The Company is obliged to submit reports of networks and/or services annually to the Indonesian Directorate General of Post and Informatics ("DGPI"), which replaced the previous Indonesian Directorate General of Post and Telecommunications ("DGPT").
    The reports comprise information such as network development progress, service quality standard achievement, numbers of customers, license payment and universal service contribution, while for internet telephone services for public purpose, internet interconnection service, and internet access service, there is additional information required such as operational performance, customer segmentation, traffic, and gross revenue.
    Details of these licenses are as follows:

Grant date/latest

License

License No.

Type of services

renewal date

License of electronic

Bank Indonesia License

Electronic money

July 3, 2009

money issuer

No. 11/432/DASP

License of money

Bank Indonesia License

Money remittance

August 5, 2009

remittance

No. 11/23/bd/8

service

License to operate internet

127/KEP/DJPPI/

Internet telephone

March 30, 2016

telephone services for

KOMINFO/3/2016

services for public

public purpose

purpose

License to operate fixed

839/KEP/M.KOMINFO/

Fixed domestic long

May 16, 2016

domestic long distance

05/2016

distance and basic

network

telephone services

network

License to operate fixed

844/KEP/M.KOMINFO/

Fixed closed network

May 16, 2016

closed network

05/2016

License to operate fixed

846/KEP/M.KOMINFO/

Fixed international and

May 16, 2016

international network

05/2016

basic telephone

services network

License to operate circuit

948/KEP/M.KOMINFO/

Circuit switched based

May 31, 2016

switched based local

05/2016

local fixed line

fixed line network

network

License to operate data

191/KEP/DJPPI/

Data communication

October 31, 2016

communication system

KOMINFO/10/2016

system services

services

License to operate internet

2176/KEP/M.KOMINFO/

Internet service

December 30, 2016

service provider

12/2016

provider

License to operate content

1040/KEP/M.KOMINFO/

Content service

May 16, 2017

service provider

16/2017

provider

License for the

1004/KEP/M.KOMINFO/

Interconnection

December 26, 2018

implementation of

2018

services

internet interconnection

services

7

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

1. GENERAL (continued)

  1. Company's Board of Commissioners, Directors, Audit Committee, Corporate Secretary, Internal Audit, and Employees
    1. Board of Commissioners and Directors
      Based on resolutions made at the Annual General Meeting ("AGM") of Stockholders of the Company as covered by notarial deed No. 31 of Ashoya Ratam., S.H., M.Kn. dated June 19, 2020 and No. 133 of Ashoya Ratam., S.H., M.Kn. dated May 24, 2019, the composition of the Company's Boards of Commissioners and Directors as of September 30,
      2020 and December 31, 2019, respectively, were as follows:

President Commissioner

September 30, 2020

December 31, 2019

Rhenald Kasali

Rhenald Kasali

Commissioner

Alex Denni

-

Commissioner

Rizal Mallarangeng

-

Commissioner

Ahmad Fikri Assegaf

-

Commissioner

Ismail

Ismail

Commissioner

Marcelino Rumambo Pandin

Marcelino Rumambo Pandin

Independent Commissioner

Marsudi Wahyu Kisworo

Marsudi Wahyu Kisworo

Independent Commissioner

Wawan Iriawan

Cahyana Ahmadjayadi

Independent Commissioner

Chandra Arie Setiawan

Margiyono Darsasumarja

President Director

Ririek Adriansyah

Ririek Adriansyah

Director of Finance

Heri Supriadi

Harry Mozarta Zen

Director of Digital Business

Muhammad Fajrin Rasyid

Faizal Rochmad Djoemadi

Director of Strategic Portfolio

Budi Setyawan Wijaya

Achmad Sugiarto

Director of Enterprise and Business

Service

Edi Witjara

Bogi Witjaksono

Director of Wholesale and

International Services

Dian Rachmawan

Edwin Aristiawan

Director of Human Capital

Management

Afriwandi

Edi Witjara

Director of Network, Information

Technology and Solution

Herlan Wijanarko

Zulhelfi Abidin

Director of Consumer Service

FM Venusiana R

Siti Choiriana

  1. Audit Committee, Corporate Secretary, and Internal Audit

The composition of the Company's Audit Committee, Corporate Secretary, and Internal Audit as of September 30, 2020 and December 31, 2019, were as follows:

Chairman

September 30, 2020

December 31, 2019

Chandra Arie Setiawan

Margiyono Darsasumarja

Member

Marsudi Wahyu Kisworo

Tjatur Purwadi

Member

Wawan Iriawan

Ismail

Member

Marcelino Rumambo Pandin

Marcelino Rumambo Pandin

Member

Sarimin Mietra Sardi

Sarimin Mietra Sardi

Member

Ahmad Fikri Assegaf

-

Member

Emmanuel Bambang Suyitno -

Corporate Secretary

Andi Setiawan

Andi Setiawan

Internal Audit

Harry Suseno Hadisoebroto

Harry Suseno Hadisoebroto

  1. Employees
    As of September 30, 2020 and December 31,2019, the Company and subsidiaries ("Group") had 25,416 employees and 24,272 employees, respectively.

8

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

1. GENERAL (continued)

  1. Public offering of securities of the Company
    The Company's shares prior to its Initial Public Offering ("IPO") totalled 8,400,000,000, consisting of 8,399,999,999 Series B shares and 1 Series A Dwiwarna share, and were wholly-owned by the Government. On November 14, 1995, 933,333,000 new Series B shares and 233,334,000 Series B shares owned by the Government were offered to the public through an IPO and listed on the Indonesia Stock Exchange ("IDX") and 700,000,000 Series B shares owned by the Government were offered to the public and listed on the New York Stock Exchange ("NYSE") and the London Stock Exchange ("LSE"), in the form of American Depositary Shares ("ADS"). There were 35,000,000 ADS and each ADS represented 20 Series B shares at that time.
    In December 1996, the Government had a block sale of its 388,000,000 Series B shares, and in 1997, distributed 2,670,300 Series B shares as incentive to the Company's stockholders who did not sell their shares within one year from the date of the IPO. In May 1999, the Government further sold 898,000,000 Series B shares.
    To comply with Law No. 1/1995 on Limited Liability Companies, at the AGM of Stockholders of the Company on April 16, 1999, the Company's stockholders resolved to increase the Company's issued share capital by the distribution of 746,666,640 bonus shares through the capitalization of certain additional paid-in capital, which was made to the Company's stockholders in August 1999. On August 16, 2007, Law No. 1/1995 on Limited Liability Companies was amended by the issuance of Law No. 40/2007 on Limited Liability Companies which became effective on the same date. Law No. 40/2007 has no effect on the public offering of shares of the Company. The Company has complied with Law No. 40/2007.
    In December 2001, the Government had another block sale of 1,200,000,000 shares or 11.9% of the total outstanding Series B shares. In July 2002, the Government further sold a block of 312,000,000 shares or 3.1% of the total outstanding Series B shares.
    At the AGM of Stockholders of the Company held on July 30, 2004, the minutes of which are covered by notarial deed No. 26 of A. Partomuan Pohan, S.H., LLM., the Company's stockholders approved the Company's 2-for-1 stock split for Series A Dwiwarna and Series B share. The Series A Dwiwarna share with par value of Rp500 per share was split into 1 Series A Dwiwarna share with par value of Rp250 per share and 1 Series B share with par value of Rp250 per share. The stock split resulted in an increase of the Company's authorized capital stock from 1 Series A Dwiwarna share and 39,999,999,999 Series B shares to 1 Series A Dwiwarna share and 79,999,999,999 Series B shares, and the issued capital stock from 1 Series A Dwiwarna share and 10,079,999,639 Series B shares to 1 Series A Dwiwarna share and 20,159,999,279 Series B shares. After the stock split, each ADS represented 40 Series B shares.
    At the AGM held on April 19, 2013, the minutes of which were covered by notarial deed No. 38 of Ashoya Ratam, S.H., M.Kn., the stockholders approved the Company's 5-for-1 stock split for Series A Dwiwarna and Series B shares. Series A Dwiwarna share with par value of Rp250 per share was split into 1 Series A Dwiwarna share with par value of Rp50 per share and 4 Series B shares with par value of Rp50 per share. The stock split resulted in an increase of the Company's authorized capital stock from 1 Series A Dwiwarna and 79,999,999,999 Series B shares to 1 Series A Dwiwarna and 399,999,999,999 Series B shares. The issued capital stock increase from 1 Series A Dwiwarna and 20,159,999,279 Series B shares to 1 Series A Dwiwarna and 100,799,996,399 Series B shares. After the stock split, each ADS represented 200 Series B shares. Effective from October 26, 2016, the Company change the ratio of Depositary Receipt from 1 ADS representing 200 series B shares to become 1 ADS representing 100 series B shares (Note 21). Profit per ADS information have been retrospectively adjusted to reflect the changes in the ratio of ADS.
    On May 16 and June 5, 2014, the Company deregistered from Tokyo Stock Exchange ("TSE") and delisted from the LSE, respectively.
    As of September 30, 2020, all of the Company's Series B shares are listed on the IDX and 40.929.645ADS shares are listed on the NYSE (Note 21).

9

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

1. GENERAL (continued)

  1. Public offering of securities of the Company (continued)
    On June 25, 2010 the Company issued the second rupiah bonds with a nominal amount of Rp1,005 billion for Series A, a five-year period and Rp1,995 billion for Series B, a ten-year period, respectively, are listed on the IDX (Note 19.b.i).

On June 16, 2015, the Company issued Continuous Bonds I Telkom Phase I 2015, with a nominal amount Rp2,200 billion for Series A, a seven-year period, Rp2,100 billion for Series B, a ten-year period, Rp1,200 billion for Series C, a fifteen-year period and Rp1,500 billion for Series D, a thirty-year period, respectively which are listed on the IDX (Note 19.b.i).

  1. Subsidiaries
    As of September 30, 2020 and December 31, 2019, the Company has consolidated the following directly or indirectly owned subsidiaries (Notes 2b and 2d):
    i. Direct subsidiaries:

Total assets before

Nature of business/date of

Year of start

Percentage of ownership*

elimination

Subsidiary/place of

Incorporation or acquisition

of commercial

September 30,

December 31,

September 30,

December 31,

incorporation

by the Company

operations

2020

2019

2020

2019

PT Telekomunikasi

Telecommunication - provides

1995

65

65

96,900

82,730

Selular

telecommunication facilities

("Telkomsel"),

and mobile celuller

Jakarta, Indonesia

services using Global

Systems for Mobile

Communication ("GSM")

technology/

May 26, 1995

PT Dayamitra

Telecommunication/

1995

100

100

21,199

20,114

Telekomunikasi

May 17, 2001

("Dayamitra"),

Jakarta, Indonesia

PT Multimedia

Network telecommunication

1998

100

100

16,280

16,478

Nusantara

services and multimedia/

("Metra"),

May 9, 2003

Jakarta, Indonesia

PT Telekomunikasi

Telecommunication/

1995

100

100

12,883

10,970

Indonesia International

July 31, 2003

("TII"),

Jakarta, Indonesia

PT Graha Sarana Duta

Leasing of offices and

1982

100

100

6,165

6,055

("GSD"),

providing building

Jakarta, Indonesia

management and

maintenance services, civil

consultant and developer/

April 25, 2001

PT Telkom Satelit

Telecomunication - provides

1996

100

100

4,699

3,309

Indonesia

satellite communication

("Telkomsat"),

system, services and

Jakarta, Indonesia

facilities/

September 28, 1995

PT Telkom Akses

Construction, service and

2013

100

100

4,070

4,436

("Telkom Akses"),

trade in the field of

Jakarta, Indonesia

telecommunication/

November 26, 2012

PT PINS Indonesia

Telecommunication

1995

100

100

2,474

2,995

("PINS"),

construction and services/

Jakarta, Indonesia

August 15, 2002

PT Infrastruktur

Construction, service and

2014

100

100

1,676

1,706

Telekomunikasi

trade in the field of

Indonesia

telecommunication/

("Telkom Infratel"),

January 16, 2014

Jakarta, Indonesia

*Percentage of ownership amounting to 99.99% is presented with rounding 100%.

10

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

1. GENERAL (continued)

d. Subsidiaries (continued)

i. Direct subsidiaries (continued):

Subsidiary/place of

incorporation

PT Metra-Net

("Metra-Net"),

Jakarta, Indonesia

PT Napsindo Primatel Internasional ("Napsindo"), Jakarta, Indonesia

Total assets before

Nature of business/date of

Year of start

Percentage of ownership*

elimination

Incorporation or acquisition

of commercial

September 30,

December 31,

September 30,

December 31,

by the Company

operations

2020

2019

2020

2019

Multimedia portal service/

2009

100

100

1,325

996

April 17, 2009

Telecommunication -

1999; ceased

60

60

5

5

provides Network Access

operations on

Point (NAP), Voice Over

January 13,

Data (VOD) and other

2006

related services/

December 29, 1998

*Percentage of ownership amounting to 99.99% is presented with rounding 100%.

  1. Indirect subsidiaries:

Total assets before

Nature of business/date of

Year of start

Percentage of ownership*

elimination

Subsidiary/place of

Incorporation or acquisition

of commercial

September 30,

December 31,

September 30,

December 31,

incorporation

by the Company

operations

2020

2019

2020

2019

PT Sigma Cipta Caraka

Information technology

1988

100

100

6,112

6,796

("Sigma"),

service - system

Tangerang, Indonesia

implementation and

integration service,

outsourcing and software

license maintenance/

May 1,1987

Telekomunikasi

Telecommunication/

2008

100

100

3,650

3,635

Indonesia

December 6, 2007

International Pte. Ltd.,

("Telin Singapore"),

Singapore

Telekomunikasi

Telecommunication/

2010

100

100

3,317

1,830

Indonesia

December 8, 2010

International Ltd,

("Telin Hong Kong"),

Hong Kong

PT Infomedia Nusantara

Data and information

1984

100

100

2,317

2,626

("Infomedia"),

service - provides

Jakarta, Indonesia

telecommunication

information services and

other information services

in the form of print and

electronic media and call

center services/

September 22,1999

PT Telkom Landmark

Service for property

2012

55

55

2,239

2,056

Tower

development and

("TLT"),

management/

Jakarta, Indonesia

February 1, 2012

PT Metra Digital

Trading and/or providing

2013

100

100

1,879

1,475

Investama

service related to

("MDI"),

information and

Jakarta, Indonesia

tehnology, multimedia,

entertainment and

investment/

January 8, 2013

PT Finnet Indonesia

Information technology

2006

60

60

1,564

1,001

("Finnet"),

services/

Jakarta, Indonesia

October 31, 2005

*Percentage of ownership amounting to 99.99% is presented with rounding 100%.

11

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

1. GENERAL (continued)

d. Subsidiaries (continued)

ii. Indirect subsidiaries (continued):

Total assets before

Nature of business/date of

Year of start

Percentage of ownership*

elimination

Subsidiary/place of

Incorporation or acquisition

of commercial

September 30,

December 31,

September 30,

December 31,

incorporation

by the Company

operations

2020

2019

2020

2019

PT Metra Digital

Directory information

2013

100

100

1,076

1,146

Media

services/

("MD Media"),

January 22, 2013

Jakarta, Indonesia

PT Melon

Digital content exchange

2010

100

100

833

578

("Melon"),

hub services/

Jakarta, Indonesia

November 14, 2016

PT Persada Sokka

Providing telecommunication

2008

95

95

824

870

Tama

network infrastucture/

("PST"),

February 19, 2019

Jakarta, Indonesia

Telekomunikasi

Telecommunication/

2012

100

100

796

706

Indonesia

September 11, 2012

International

("Telin TL") S.A.,

Dili, Timor Leste

TS Global Network

Satellite services/

1996

70

70

727

732

Sdn. Bhd.

December 14, 2017

("TSGN"),

Petaling Jaya,

Malaysia

PT Telkomsel Mitra

Bussiness management

2019

100

100

592

569

Inovasi

consulting and capital

("TMI"),

venture services/

Jakarta, Indonesia

January 18, 2019

PT Swadharma

System Integrator Services/

2001

51

51

567

520

Sarana

April 2, 2018

Informatika

("SSI"),

Jakarta, Indonesia

PT Administrasi

Health insurance

2002

100

100

471

395

Medika

administration services/

("Ad Medika"),

February 25, 2010

Jakarta, Indonesia

PT Graha Yasa

Tourism service/

2012

51

51

292

288

Selaras

April 27, 2012

("GYS"),

Jakarta, Indonesia

PT Nusantara

Service and trading/

2014

100

100

261

272

Sukses Investasi

September 1, 2014

("NSI"),

Jakarta, Indonesia

PT Metraplasa

Network & e-commerce

2012

60

60

155

214

("Metraplasa"),

services/

Jakarta, Indonesia

April 9, 2012

PT Nutech Integrasi

System integrator/

2001

60

60

128

177

("Nutech"),

December 13, 2017

Jakarta, Indonesia

*Percentage of ownership amounting to 99.99% is presented with rounding 100%.

12

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

1. GENERAL (continued)

d. Subsidiaries (continued)

ii. Indirect subsidiaries (continued):

Total assets before

Nature of business/date of

Year of start

Percentage of ownership*

elimination

Subsidiary/place of

Incorporation or acquisition

of commercial

September 30,

December 31,

September 30,

December 31,

incorporation

by the Company

operations

2020

2019

2020

2019

Telekomunikasi

Telecomunication

2014

100

100

111

89

Indonesia

December 11, 2013

International Inc.,

("Telkom USA"),

Los Angeles, USA

Telekomunikasi

Telecommunication/

2013

100

100

104

86

Indonesia

January 9, 2013

International Pty Ltd,

("Telkom Australia"),

Sydney, Australia

Telekomunikasi

Telecommunication/

2013

70

70

55

67

Indonesia Intl

July 2, 2013

(Malaysia) Sdn. Bhd

("Telin Malaysia"),

Malaysia

PT Satelit

Satellite services/

2013

100

100

14

16

Multimedia

March 25, 2013

Indonesia

("SMI"),

Jakarta, Indonesia

*Percentage of ownership amounting to 99.99% is presented with rounding 100%.

e. Acquisition transactions of subsidiaries

  1. Dayamitra
    PST

On February 19, 2019, Dayamitra purchased 95% ownership in PST from Rahina Dewayani and Rahayu based on a Conditional Stock Sale and Purchase Agreement. Based on the agreement, Dayamitra purchased 95% ownership of PST amounting to Rp1,113 billion and is required to purchase the remaining 5% ownership of PST within a maximum of 24 months from March 8, 2019, at the same price per share as the acquisition of 95% shares. In connection with such requirement, on December 31, 2019 Dayamitra recognized the liabilities to the previous shareholder of Rp80 billion. Based on an analysis of the terms and conditions associated with the transaction, it was concluded that at the acquisition date Dayamitra had substantially held 100% ownership of PST shares and as such there were no non-controlling interests.

PST is a company engaged in managing tower rental. This new investment is expected to strengthen the Company's business portfolio. From the acquisition date to September 30, 2020, total revenue and profit before tax recorded by PST and recognized in the consolidated statements of profit or loss and other comprehensive income amounted to Rp384 billion and Rp97 billion, respectively. This acquisition was accounted as a business combination.

Purchase of Indosat's Towers

On October 14, 2019, Dayamitra signed a Sales Purchase Agreement ("SPA") with PT Indosat, Tbk. ("Indosat") related to the purchase of Indosat's towers. The matters stipulated and agreed simultaneously with the SPA are as follows:

  1. Transfer of ownership 2,100 telecommunication towers (3,982 tenants) and their licenses;
  2. Transfer of 1,731 leases of lands previously leased by Indosat from third parties;
  3. 369 leases of lands owned by Indosat; and
  4. Transfer of the collocation contracts and the related user's details of 3,982 existing tenants in the towers being acquired.

13

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

1. GENERAL (continued)

e. Acquisition transactions of subsidiaries (continued) i. Dayamitra (continued)

On December 20, 2019, Dayamitra and Indosat have signed Letter Agreement (Closing Memo), as a follow-up on the SPA, amounting to Rp4,443 billion.

In addition, Dayamitra and Indosat also signed Master Tower Lease Agreement ("MTLA"), which stipulated that Indosat agreed to lease back for one each of the slot in 2,100 telecommunication towers acquired. This acquisition was accounted for as an asset acquisition.

The fair values of the identifiable assets and liabilities acquired for these two transactions were:

Indosat's

Assets

Tower

PST shares

Total

Current assets

517

146

663

Property and equipment

3,453

634

4,087

Non-current assets

-

91

91

Liabilities

-

(610)

(610)

Net book value of net assets

3,970

261

4,231

The difference between fair value and

book value of fixed assets

-

398

398

Other non-current assets

473

194

667

Deferred tax

-

(148)

(148)

Fair value of identifiable net assets acquired

4,443

705

5,148

Fair value consideration transferred

4,443

1,172

5,615

Goodwill (Note 14)

-

467

467

  1. Telkomsel

Based on notarial deed of Bonardo Nasution, S.H. No. 12 dated January 18, 2019, Telkomsel established TMI. On February 18, 2019, Telkomsel paid Rp550 billion for 549,989 shares from the total 550,000 shares of TMI.

TMI is a company engaged in innovation and strategic investment. This new investment is expected to strengthen the Company's business portfolio in order to transform to telecommunication digital company.

.

  1. Completion and authorization for the issuance of the consolidated financial statements
    The Company's management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Indonesian Financial Accounting Standards, which have been completed and authorized for issuance by the Board of Directors of the Company on November 4, 2020.

14

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements of the Company and subsidiaries (collectively referred to as "the Group") have been prepared in accordance with Financial Accounting Standards ("Standar Akuntansi Keuangan" or "SAK") including Indonesian Statement of Financial Accounting Standards ("Pernyataan Standar Akuntansi Keuangan" or "PSAK") and interpretation of Financial Accounting Standards ("Interpretasi Standar Akuntansi Keuangan" or "ISAK") in Indonesia published by the Financial Accounting Standards Board of Institute of Indonesian Chartered Accountants and Regulation No. VIII.G.7 of the Capital Market and Financial Institution Supervisory Agency ("Bapepam-LK") regarding the Presentation and Disclosure of Financial Statements of Issuers or Public Companies, enclosed in the decision letter KEP-347/BL/2012.

  1. Basis of preparation of financial statements
    The consolidated financial statements, except for the consolidated statements of cash flows, are prepared on the accrual basis. The measurement basis used is historical cost, except for certain accounts which are measured using the basis mentioned in the relevant notes herein.
    The consolidated statements of cash flows are prepared using the direct method and present the changes in cash and cash equivalents from operating, investing and financing activities.
    Figures in the consolidated financial statements are presented and rounded to billions of Indonesian rupiah ("Rp"), unless otherwise stated. For the figures in the consolidated financial statements which still contain values but below Rp1 billion, are presented with zeros.
    Accounting standards issued but not yet effective Effective January 1, 2021
    • PSAK 22: Business Combination
      This amendment clarifies the definition of business in order to assist the entity in determining whether a transaction should be recorded as a business combination asset acquisition.
    • PSAK 73: Lease
      This amendment provides that lessee may choose not to assess whether the lease concession related to Covid-19 is a modification of the lease and provides requirements that must be met for such practical ways to be applied.
  2. Principles of consolidation
    The consolidated financial statements consist of the financial statements of the Company and the subsidiaries over which it has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has the power over the investee, exposure or rights, to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect its returns.

Generally, there is a presumption that majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

  1. The contractual arrangement with the other vote holders of the investee,
  2. Rights arising from other contractual arrangements, and
  3. The Group's voting rights and potential voting rights.

The Group re-assesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control over the subsidiary. Assets, liabilities, income and expenses, of a subsidiary acquired or disposed of during the year are included in the consolidated statements of profit or loss and other comprehensive income from the date the Group gain control until the date the Group ceases to control the subsidiary.

15

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Principles of consolidation (continued)
    Profit or loss and each component of other comprehensive income ("OCI") are attributed to the equity holders of the Company and to the non-controlling interests, even if this results in the non- controlling interests having a deficit balance.
    All assets and liabilities, equity, revenue and expenses and cash flow from transactions within Group have been eliminated at the time of consolidation.
    In case of loss of control over a subsidiary, the Group:
    • derecognizes the assets (including goodwill) and liabilities of the subsidiary at the carrying amounts on the date when it loses control;
    • derecognizes the carrying amounts of any non-controlling interests of its former subsidiary on the date when it loses control;
    • recognizes the fair value of the consideration received (if any) from the transaction, events, or condition that caused the loss of control;
    • recognizes the fair value of any investment retained in the subsidiary at fair value on the date of loss of control;
    • recognizes any surplus or deficit in profit or loss that is attributable to the Group.
  2. Transactions with related parties
    The Group has transactions with related parties. The definition of related parties used is in accordance with the Bapepam-LK's Regulation No. VIII.G.7 regarding the Presentations and Disclosures of Financial Statements of Issuers or Public Companies, enclosed in the decision letter No. KEP-347/BL/2012. The party which is considered as a related party is a person or entity that is related to the entity that is preparing its financial statements.
    Under the Regulation of Bapepam-LK No. VIII.G.7, a government-related entity is an entity that is controlled, jointly controlled or significantly influenced by the government. Government in this context is the Minister of Finance or the Local Government, as the shareholder of the entity.
    Key management personnel are identified as the persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of the Group. The related party status extends to the key management of the subsidiaries to the extent they direct the operations of subsidiaries with minimal involvement from the Company's management.
  3. Business combinations
    Business combination is accounted for using the acquisition method. The consideration transferred is measured at fair value, which is the aggregate of the fair value of the assets transferred, liabilities incurred or assumed and the equity instruments issued in exchange for control of the acquiree. For each business combination, non-controlling interest is measured at fair value or at the proportionate share of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Acquisition-related costs are expensed as incurred. The acquiree's identifiable assets and liabilities are recognized at their fair values at the acquisition date.
    Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed, and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the re- assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in profit or loss.

16

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) d. Business combinations (continued)

When the determination of consideration from a business combination includes contingent consideration, it is measured at its fair value on acquisition date. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognized in profit or loss when adjustments are recorded outside the measurement period. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments made against goodwill. Measurement-period adjustments are adjustments that arise from additional information obtained during the measurement period, which cannot exceed one year from the acquisition date, about facts and circumstances that existed at the acquisition date.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group shall report in its consolidated financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the Group shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. The measurement period ends immediately after the Company receives the information about the facts and circumstances that existed at the acquisition date or learns that additional information cannot be obtained. However, the measurement period must not exceed one year from the date of acquisition.

In a business combination achieved in stages, the acquirer remeasures its previously held equity interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain or loss, if any, in profit or loss.

Based on PSAK 38 (Revised 2012), "Common Control Business Combination", the transfer of assets, liabilities, shares or other ownership instruments among the companies under common control would not result in a gain or loss for the Company or individual entity in the same group. Since the restructuring transaction between entities under common control does not result in a change of the economic substance of the ownership of assets, liabilities, shares or other instruments of ownership, which are exchanged, assets or liabilities transferred are recorded at book value using the pooling-of-interests method.

In applying the pooling-of-interests method, the components of the financial statements for the period during the restructuring occurred must be presented in such a manner as if the restructuring has occurred since the beginning of the earliest period presented. The excess of consideration paid or received over the carrying value of interest acquired, net of income tax, is directly recognized to equity and presented as "Additional Paid-in Capital" under the equity section of the consolidated statement of financial position.

At the initial application of PSAK 38 (Revised 2012), all balances of the Difference In Value of Restructuring Transactions of Entities under Common Control was reclassified to "Additional Paid- in Capital" in the consolidated statement of financial position.

  1. Cash and cash equivalents
    Cash and cash equivalents comprises cash on hand, cash in banks and all unrestricted time deposits with original maturities of three months or less at the time of placement.
    Time deposits with maturities of more than three months but not more than one year are presented as part of "Other Current Financial Assets" in the consolidated statements of financial position (Note 2u).

17

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Investments in associated companies
    An associate is an entity over which the Group (as investor) has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but does not include control or joint control over those operating policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries.
    The Group's investments in its associates are accounted for using the equity method.
    Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the investor's share of the net assets of the associate since the acquisition date. On acquisition of the investment, any difference between the cost of the investment and the entity's share of the net fair value of the investee's identifiable assets and liabilities is accounted for as follows:
    1. Goodwill relating to an associate or a joint venture is included in the carrying amount of the investment and is neither amortized nor individually tested for impairment, and
    2. Any excess of the entity's share of the net fair value of the investee's identifiable assets and liabilities over the cost of the investment is included as income in the determination of the entity's share of the associate or joint venture's profit or loss in the period in which the investment is acquired.

The consolidated statements of profit or loss and other comprehensive income reflect the Group's share of the results of operations of the associate. Any change in the other comprehensive income of the associate is presented as part of other comprehensive income. In addition, when there has been a change recognized directly in the equity of the associate, the Group recognizes it share of the change in the consolidated statements of changes in equity. Unrealized gain and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The Group determines at each reporting date whether there is any objective evidence that the investments in associated companies are impaired. If there is, the Group calculates and recognizes the amount of impairment as the difference between the recoverable amount of the investments in the associated companies and their carrying value.

These assets are included in "Long-term Investments" in the consolidated statements of financial position.

For the purpose of reporting these investments using the equity method, the assets and liabilities of these companies as of the statement of financial position date are translated into Indonesian rupiah using the rate of exchange prevailing at that date, while revenues and expenses are translated into Indonesian rupiah at the average rates of exchange for the year. The resulting translation adjustments are reported as part of "translation adjustment" in the equity section of the consolidated statements of financial position.

  1. Trade and other receivables
    Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost, less provision for impairment. This provision for impairment is made based on management's evaluation of the collectability of the outstanding amounts. Receivable are written off in the year they are determined to be uncollectible (Note 2u).

18

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Inventories
    Inventories consist of components, which are subsequently expensed upon use. Components represent telephone terminals, cables, and other spare parts. Inventories also include Subscriber Identification Module ("SIM") cards, handsets, wireless broadband modems and blank prepaid vouchers, which are expensed upon sale.
    The costs of inventories consist of the purchase price, import duties, other taxes, transport, handling, and other costs directly attributable to their acquisition. Inventories are recognized at the lower of cost and net realizable value. Net realizable value is the estimate of selling price less the expected costs to sell.
    Cost is determined using the weighted average method.
    The amounts of any write-down of inventories below cost to net realizable value and all losses of inventories are recognized as expense in the period in which 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 general and administrative expenses in the year in which the reversal occurs.
    Provision for obsolescence is primarily based on the estimated forecast of future usage of these inventory items.
  2. Prepaid expenses
    Prepaid expenses are amortized over their future beneficial periods using the straight-line method.
  3. Assets held for sale
    Assets (or disposal groups) are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.
    Assets that meet the criteria to be classified as held for sale are reclassified from property and equipment and depreciation on such assets is ceased.
  4. Intangible assets
    Intangible assets mainly consist of software. Intangible assets are recognized if it is highly probable that the expected future economic benefits that are attributable to each asset will flow to the Group, and the cost of the asset can be reliably measured.
    Intangible assets are stated at cost less accumulated amortization and impairment losses, if any. Intangible assets are amortized over their estimated useful lives. The Group estimates the recoverable value of its intangible assets. When the carrying amount of an intangible asset exceeds its estimated recoverable amount, the asset is written down to its estimated recoverable amount.
    Intangible assets except goodwill are amortized using the straight-line method, based on the estimated useful lives of the intangible assets as follows:

Years

Software

3-6

License

3-20

Other intangible assets

1-30

19

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Intangible assets (continued)
    Intangible assets are derecognized on disposal, or when no further economic benefits are expected, either from further use or from disposal. The difference between the carrying amount and the net proceeds received from disposal is recognized in the consolidated statements of profit or loss and other comprehensive income.
  2. Property and equipment
    Property and equipment are stated at cost less accumulated depreciation and impairment losses, if any.
    The cost of an item of property and equipment includes: (a) purchase price, (b) any costs directly attributable to bringing the asset to its location and condition, and (c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Each part of an item of property and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.
    Property and equipment, except land rights, are depreciated using the straight-line method based on the estimated useful lives of the assets as follows:

Years

Buildings

15-40

Leasehold improvements

2-15

Switching equipment

3-15

Telegraph, telex and data communication equipment

5-15

Transmission installation and equipment

3-25

Satellite, earth station and equipment

3-20

Cable network

5-25

Power supply

3-20

Vehicles

4-8

Data processing equipment

3-20

Other telecommunication peripherals

5

Office equipment

2-5

Customer Premises Equipment ("CPE") asset

4-5

Other equipment

2-5

Significant expenditures related to leasehold improvements are capitalized and depreciated over the lease term.

The depreciation method, useful life and residual value of an asset are reviewed at least at each financial year-end and adjusted, if appropriate. The residual value of an asset is the estimated amount that the Group would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset is already of the age and in the condition expected at the end of its useful life.

Property and equipment acquired in exchange for a non-monetary asset or for a combination of monetary and non-monetary assets are measured at fair value unless, (i) the exchange transaction lacks commercial substance; or (ii) the fair value of neither the asset received nor the asset given up is measured reliably.

Major spare parts and standby equipment that are expected to be used for more than 12 months are recorded as part of property and equipment.

When assets are retired or otherwise disposed of, their cost and the related accumulated depreciation are derecognized from the consolidated statement of financial position and the resulting gains or losses on the disposal or sale of the property and equipment are recognized in the consolidated statements of profit or loss and other comprehensive income.

20

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Property and equipment (continued)
    Certain computer hardware can not be used without the availability of certain computer software. In such circumstance, the computer software is recorded as part of the computer hardware. If the computer software is independent from its computer hardware, it is recorded as part of intangible assets.
    The cost of maintenance and repairs are charged to the consolidated statements of profit or loss and other comprehensive income as incurred. Significant renewals and betterments are capitalized.
    Property under construction is stated at cost until the construction is completed, at which time it is reclassified to the property and equipment account to which it relates. During the construction period until the property is ready for its intended use or sale, borrowing costs, which include interest expense and foreign currency exchange differences incurred on loans obtained to finance the construction of the asset, as long as it meets the definition of a qualifying asset are, capitalized in proportion to the average amount of accumulated expenditures during the period. Capitalization of borrowing cost ceases when the construction is completed and the asset is ready for its intended use or sale.
  2. Leases
    Accounting policy for leases applied from January 1, 2020
    PSAK 73 sets out a comprehensive model for identification of lease agreements and its treatment in the financial statements of both lessees and lessors. PSAK 73 introduces a control model for the identification of leases, distinguishing between leases and service contracts on the basis of whether there is an identified asset controlled by the customer.
    The Group adopted PSAK 73 as at January 1, 2020 using the modified retrospective method by recognizing the cumulative effect of initially applying PSAK 73 as an adjustment to the opening balance of equity at January 1, 2020. Accordingly, the comparative information presented for 2019 has not been restated and it is presented, as previously reported, under PSAK 30 and the related interpretations.
    The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The lease term corresponds to the non-cancellable period of each contract, except in cases where the Group is reasonably certain of exercising renewal options contractually foreseen.
    The Group has made use of the package of practical expedients available under the transition guidance within PSAK 73, which among other things:
    • the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
    • the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2020 as short-term leases;
    • the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application;
    • the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease;
    • apply PSAK 73 to leases that were previously identified under PSAK 30 and ISAK 8, and not to apply PSAK 73 to those that were not previously identified under these two standards;
    • not to separate non-lease components from lease components, and instead, account for both as a single lease component; and
    • not to recognize a lease liability and a Right-of-Use ("ROU") asset for leases where the underlying assets are low-value assets (i.e. underlying assets with a maximum value of USD5,000 or IDR50 million when new).

21

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Leases (continued)
    PSAK 73 also permits the Group not to reassess the Group prior conclusions about lease identification, lease classification and the Group has elected to carry forward the historical lease assessments and relied on its assessment made applying PSAK 30 and ISAK 8 Determining whether an Arrangement contains a Lease. The Group applies the definition of a lease and related guidance set out in PSAK 73 to all lease contracts entered into or modified on or after January 1, 2020.
    1. The Group as Lessee
      The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and ROU assets representing the right to use the underlying assets.
      The Group recognizes ROU assets at the commencement date of the lease. ROU assets are measured at cost, less any accumulated amortization and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of ROU assets includes the amount of lease liabilities recognized, initial direct costs incurred, restoration costs and lease payments made at or before the commencement date less any lease incentives received.
      ROU assets are amortized on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:

Years

Buildings

15-40

Transmission installation and equipment

3-25

Power supply

3-20

Vehicles

4-8

Others

2-25

If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The ROU assets are subject to impairment in accordance with PSAK 48 Impairment of Assets.

Lease liabilities

At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset.

22

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) m. Leases (continued)

  1. The Group as Lessee (continued)
    Short-term leases with a duration of less than 12 months, short-term lease ends within 12 months after January 1, 2020 and low-value leases, as well as those lease elements, partially or totally not complying with the principles of recognition defined by PSAK 73 will be treated similarly to operating leases. The Group will recognize those lease payments on a straight-line basis over the lease term in the consolidated statements of profit or loss and other comprehensive income.
  2. The Group as Lessor
    Under PSAK 73, a lessor continues to classify leases as either finance leases or operating leases and account for those two types of leases differently. Leases in which the Group transfers substantially all the risks and rewards incidental to ownership of an asset are classified as finance leases, otherwise it will be classified as an operating leases. Lease classification is made at the inception date and is reassessed only if there is a lease modification.
    At the commencement date, the Group recognizes assets held under a finance lease at an amount equal to the net investment in the lease and present it as finance lease receivable. The net investment in the lease include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and residual value guarantees provided to the lessor by the lessee. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the lessee and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate.
    As required by PSAK 73, an allowance for expected credit loss has been recognized on the finance lease receivables.
    Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
    If an arrangement contains lease and non-lease components, the Group applies PSAK 72 Revenue from Contracts with Customers to allocate the consideration in the contract.

Accounting policy for leases applied until December 31, 2019

  1. As lessee
    A lease is classified at the commencement date as a finance lease or operating lease. A lease that transfers substantially all the risks and benefits associated with ownership of shares to the Group is classified as a finance lease.
    The finance lease is capitalized at the beginning of lease terms at the fair value of the leased assets or, if lower, present value of the minimum lease payment. Lease payments are apportioned between the finance charge and rental expenses. The finance charge is allocated to each period during the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability. Financial charges are recognized as finance costs in profit or loss.
    The Group did not change the initial carrying amounts of recognized assets and liabilities at the date of initial application for leases previously classified as finance leases (i.e. the ROU assets and lease liabilities equal the lease assets and liabilities recognized under PSAK 30). The requirements of PSAK 73 were applied to these leases from January 1, 2020.

23

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Leases (continued)
    Accounting policy for leases applied until December 31, 2019(continued)
    1. As lessee (continued)
      Leased assets are depreciated based on the useful lives. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease terms, the leased assets are fully depreciated over the shorter of the lease terms and their economic useful lives.
      Operating leases are leases other than finance leases. Payments are charged under operating leases are recognized as an expense in profit or loss on a straight-line basis over the lease period.
    2. As lessor
      Leases where the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. The initial direct costs incurred in negotiating and arranging operating leases are added to the carrying value of the leased assets and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as income in the period in which they are earned.
  2. Deferred charges - land rights
    Costs incurred to process the initial legal land rights are recognized as part of the property and equipment and are not amortized. Costs incurred to process the extension or renewal of legal land rights are deferred and amortized using the straight-line method over the shorter of the legal term of the land rights or the economic life of the land.
  3. Trade payables
    Trade payables are obligations to pay for goods and/or services that have been acquired from suppliers in the ordinary course of business. Trade payables are classified as current liabilities if the payment is due within one year or less. If not, they are presented as non-current liabilities.
    Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
  4. Borrowings
    Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statements of profit or loss and other comprehensive income over the period of the borrowings using the effective interest method.
    Fees paid on obtaining loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facilities will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence that it is probable that some or all of the facilities will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facilities to which it relates.
  5. Foreign currency translations
    The functional currency and the reporting currency of the Group are both the Indonesian rupiah, except for the functional currency of Telekomunikasi Indonesia International Ltd., Hong Kong, Telekomunikasi Indonesia International Pte. Ltd., Singapore, Telekomunikasi Indonesia International Inc., USA and Telekomunikasi Indonesia International S.A., Timor Leste whose functional currency is maintained in U.S. dollars and Telekomunikasi Indonesia International, Pty. Ltd., Australia whose functional currency is Australian dollars, TS Global Network Sdn. Bhd., and Telekomunikasi Indonesia International Sdn. Bhd. whose functional currency is Malaysian ringgit.

24

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Foreign currency translations (continued)
    Transactions in foreign currencies are translated into Indonesian rupiah at the rates of exchange prevailing at transaction date. At the consolidated statements of financial position dates, monetary assets and liabilities denominated in foreign currencies are translated into Indonesian rupiah based on the buy and sell rates quoted by Reuters prevailing at the consolidated statements of financial position dates, as follows (in full amount):

September 30, 2020

December 31, 2019

United States dollar ("US$") 1

Buy

Sell

Buy

Sell

14,840

14,920

13,880

13,885

Australian dollar ("AU$") 1

10,562

10,620

9,724

9,729

Euro ("EUR") 1

17,373

17,473

15,559

15,571

Japanese yen ("JPY") 1

140.45

141.22

127.76

127.82

Malaysian ringgit ("MYR") 1

3,569

3,593

3,390

3,394

The resulting foreign exchange gains or losses, realized and unrealized, are credited or charged to the consolidated statements of profit or loss and other comprehensive income of the current year, except for foreign exchange differences incurred on borrowings during the construction of qualifying assets which are capitalized to the extent that the borrowings can be attributed to the construction of those qualifying assets (Note 2l).

  1. Revenue and expense recognition Revenue from contract with customers
    PSAK 72 establishes a comprehensive framework to determine how, when and how much revenue is to be recognized. The standard provides a single, principles-basedfive-step model for the determination and recognition of revenue to be applied to all contracts with customers. The standard also provides specific guidance requiring certain types of costs to obtain and/or fulfil a contract to be capitalized and amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the capitalized cost relates.
    The Group adopted PSAK 72 as at January 1, 2020 using the modified retrospective method by recognising the cumulative effect of initially applying PSAK 72 as an adjustment to the opening balance of equity at January 1, 2020.
    The Group has also elected to apply the following practical expedients on the transition date:
    1. Completed contracts - the Group applied PSAK 72 only to customer contracts that had not been completed on January 1, 2020; and
    2. Contract modifications - instead of applying a retrospective approach to quantify the cumulative effects of contract modifications from the time each modification was made; the Group aggregated the effects of all contract modifications that occured before January 1, 2020 in order to:
      1. identify satisfied and unsatisfied performance obligations;
      2. determine the transaction price of the latest modified contract; and
      3. allocate the transaction price to the satisfied and unsatisfied performance obligations as of January 1, 2020.

Moreover, the Group also elected to apply practical expedient to not account for the effect of financing component when the period between the payment for a promised good or service and the transfer for such good or service to the customer is less than one year, in adopting PSAK 72.

25

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Revenue and expense recognition (continued) Revenue from contract with customers(continued)
    Below is the summary of the Group's revenue recognition accounting policy for each revenue stream:
    1. Mobile
      Revenue from mobile primarily comprises of revenue from cellular service which among others: telephone service, interconnection service, internet and data service and Short Messaging Services ("SMS") service. Those services are offered on postpaid or prepaid basis, which for prepaid, the sales of starter packs (also known as SIM cards and start-up load vouchers) and pulse reload vouchers are recognized initially as contract liabilities. The Group recognize contract assets for provision of service from postpaid customers not yet billed.
      All mobile services revenues are recognized based on output method, either per actual usage or allowance unit used (if services sold in plan basis), because the customer simultaneously receives and consumes the benefits provided by the Group.
      For services sold in bundled plan, total consideration is allocated to performance obligations based on stand-alone selling price for each of product and/or service. The Group estimated the stand-alone selling price using the price enacted if the services are sold on a stand-alone basis. Most bundled plans sold by the Group only include services which are generally satisfied over the same period of time. Therefore the revenue recognition pattern is generally not impacted by the allocation.
      As part of its marketing programme, the Group had a customer loyalty programme named "Telkomsel Poin", which allows customers to accumulate points for every certain multiple of the telecommunication service usage. The points can be redeemed in the future for free or discounted products or services, provided that other qualifying conditions are achieved.
      The consideration that is received is allocated between the telecommunication services and the points issued, with the consideration allocated to points that are equal to its fair value. The fair value of the points is determined according to historical information relating to the redemption rate of award points. The fair value of the points that are issued is deferred and recognized as revenue when the points are redeemed or have expired.
    1. Consumer
      Revenue from Consumer primarily comprises of revenue from fixed telephone and Indihome services. Revenues from fixed telephone service are derived from customer who subscribes to fixed telephone service only. While revenues from Indihome service are derived from customer who subscribes to internet service or to more than one retail products. Those services are offered on postpaid basis which billed in in the following month. The contracts are offered as month to month contract.
      All consumer services are recognized using the output method based on the customer's actual usage or time elapsed if the service sold as plan basis as the customer simultaneously receives and consumes the benefits provided by the Group.
      The Group has a bundled services plan named "Indihome". Under this bundled plan, the customer is allowed to subscribe to a combination of Consumer's service (i.e. telephone, internet and data and paid TV). Prior to 2018, the Group allocates the total contract price to the distinct performance obligations based on the stand-alone selling price of each performance obligation. The Group estimates the stand-alone selling price using the price enacted if the services are sold on a stand-alone basis. Starting from 2019, this bundled service presented under single line item "Indihome" in note to financial statements (Note 24) in order to be more appropriate and representative of services delivered to customers.

26

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Revenue and expense recognition (continued) Revenue from contract with customers(continued)
    1. Consumer (continued)
      Customers may be required to pay an upfront fee at the commencement of the contract. The upfront fee is considered to be a material right because the customer is not required to pay an upfront fee when the customer renews the service beyond the original contract period. The Group values the renewal option in the amount of the consideration received from the upfront fee for the installation service. The Group defers the amount of renewal option and recognizes it as revenue on a straight-line basis over the expected term of the customer relationships. The Group estimates the expected customer life based on the historical information and customer trends and updates the evaluation on an annual basis.
    2. Enterprise
      Revenue from Enterprise primarily comprises of revenue from providing telephone service, data and internet service, information technologies service, and other services (e.g. sales of peripherals, manage service, call center service, e-health,e-payment, and others.). Some of the contracts with enterprise customers are bespoke in nature.
      Revenues from enterprise are recognized overtime using output method based on actual usage or time elapsed if the provision of service does not depend on usage (i.e. minute of voice, kilobyte of data, etc.), except for sales of goods which are recognized as a point in time, because the customer simultaneously receives and consumes the benefits provided by the Group. Revenues for performance obligations that are satisfied at a point in time is recognized when control of goods is transferred to the customer, typically when the customer has physical possession of the goods.
      Some of the arrangements in enterprise are offered as bundled arrangements. For bundled arrangements, the product and/or service in the contract is accounted for as an individual performance obligation when it is separately identifiable from other promises in the contract and the customer can benefit from the product/service on its own. The total consideration is allocated to each distinct performance obligation that has been included in the contract, based on its stand-alone selling price. The stand-alone selling price is determined according to the observable prices at which individual product and/or service are sold separately, adjusted for market conditions and normal discounts as appropriate. Alternatively, when the observable prices are not available, the expected cost plus margin approach is used to determine the stand- alone selling prices.
      Certain contracts with enterprise customers may give rise to variable consideration as the contract price depends on a future event (e.g. usage based contract or revenue-share based contract). In estimating the variable consideration, the Group is required to use either the expected value method or the most likely amount method based on the method that better predicts the amount of consideration to which it will be entitled. The Group determines that the most expected value method is the appropriate method to use in estimating the variable consideration for a single contract with a large number of possible outcomes.
      Before including any amount of variable consideration in the transaction price, the Group considers whether the amount of variable consideration is constrained. The Group determines that the estimates of variable consideration are not constrained based on its historical experience, business forecast and the current economic conditions and only includes variable consideration to the extent that it is highly probable that a significant reversal in the amount of cummulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

27

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Revenue and expense recognition (continued) Revenue from contract with customers(continued)
    1. Enterprise (continued)
      When another party is involved in providing products and/or services to a customer, the Group is the principal if it controls the specified products and/or services before those products and/or services are transferred to the customer. Revenues are recorded on the net amount that has been retained (the amount paid by the customer less the amount paid to the suppliers), when, in substance, the Group has acted as agent and earned commission from the suppliers of the products and/or services sold.

iv. Wholesale and International Business ("WIB")

Revenue from WIB is mainly comprised of interconnections service for interconnection of other telecommunications carriers' subscriber calls to the Group's subscribers (incoming) and calls between other telecommunications carriers subscribers through the Group's network (transit) and network service with other telecommunications carriers. All of these services are recognized based on output method using the basis of the actual recorded traffic for the month.

Incremental cost of obtaining/fulfilling contract with customers

The incremental costs of obtaining/fulfiling contracts with customers, which principally is comprised of sales commissions and contract fulfilment costs, are initially recognized on the statement of financial position. These costs are subsequently amortized on a systematic basis that is consistent with the period and pattern of transfer to the customer of the related products or services. Costs that do not qualify as costs of obtaining/fulfilling contract with customers are expensed as incurred or in accordance with other relevant standards.

Revenue from other sources

Revenue from other sources's comprise of revenue from telecommunication tower leases and other rental. Rental income is recognized on a straight-line basis over the lease term and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.

Accounting policy for revenue applied until December 31, 2019

  1. Cellular revenues
    Revenues from postpaid service, which consist of usage and monthly charges, are recognized as follows:
    1. Airtime and charges for value added services are recognized based on usage by subscribers.
    2. Monthly subscription charges are recognized as revenues when incurred by subscribers.

Revenues from prepaid service, which consist of the sale of starter packs (also known as SIM cards and start-up load vouchers) and pulse reload vouchers, are recognized initially as unearned income and recognized as revenue based on total of successful calls made and the value added services used by the subscribers or the expiration of the unused stored value of the voucher.

  1. Fixed line telephone revenues
    Revenues from usage charges are recognized as customers incur the charges. Monthly subscription charges are recognized as revenues when incurred by subscribers.
    Revenues from fixed line installations are deferred and recognized as revenue on the straight- line basis over the expected term of the customer relationships. The Group estimates the expected customer life based on the historical information and customer trends and updates the evaluation on an annual basis

28

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Revenue and expense recognition (continued)
    Accounting policy for revenue applied until December 31, 2019 (continued)
    1. Indihome's revenues
      Revenues from Indihome service is derived from customer who subscribes to internet service or to more than one retail products. Those services are offered on postpaid basis which is billed in the following month. The contracts are offered as month to month contract and revenues are recognized monthly as its billed.
      Revenues from Indihome connection installations are deferred and recognized as revenue on a straight-line basis over the estimated term of customer relationship based on historical information and customer trends and also update its annually evaluation.
    2. Interconnection revenues
      Revenues from network interconnection with other domestic and international telecommunications carriers are recognized monthly on the basis of the actual recorded traffic for the month. Interconnection revenues consist of revenues derived from other operators' subscriber calls to the Group's subscribers (incoming) and calls between subscribers of other operators through the Group's network (transit).
    3. Data, internet, and information technology service revenues
      Revenues from data communication and internet are recognized based on service activity and performance which are measured by the duration of internet usage or based on the fixed amount of charges depending on the arrangements with customers.
      Revenues from sales, installation and implementation of computer software and hardware, computer data network installation service and installation are recognized when the goods are delivered to customers or the installation takes place.
      Revenue from computer software development service is recognized using the percentage-of- completion method.
    4. Network revenues
      Revenues from network consist of revenues from leased lines and satellite transponder leases which are recognized over the period in which the services are rendered.
    5. Other revenues
      Revenues from sales of peripherals or other telecommunications equipments are recognized when delivered to customers.
      Revenues from telecommunication tower leases are recognized on straight-line basis over the lease period in accordance with the agreement with the customers.
      Revenues from other services are recognized when services are rendered to customers.
    6. Multiple-elementarrangements
      Where two or more revenue-generating activities or deliverables are sold under a single arrangement, each deliverable that is considered to be a separate unit of accounting is accounted for separately. The total revenue is allocated to each separately identifiable component based on the relative fair value of each component and the appropriate revenue recognition criteria are applied to each component as described above.

29

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Revenue and expense recognition (continued)
    Accounting policy for revenue applied until December 31, 2019 (continued)
    1. Agency relationship

    2. Revenues from an agency relationship are recorded based on the gross amount billed to the customers when the Group acts as principal in the sale of goods and services. Revenues are recorded based on the net amount retained (the amount paid by the customer less amount paid to the suppliers) when, in substance, the Group has acted as agent and earned commission from the suppliers of the goods and services sold.
    3. Customer loyalty programme

      1. The Group operates a loyalty programme, which allows customers to accumulate points for every certain multiple of the telecommunication services usage. The points can be redeemed in the future for free or discounted products or services, provided other qualifying conditions are achieved.
        Consideration received is allocated between the telecommunication services and the points issued, with the consideration allocated to the points equal to their fair value. Fair value of the points is determined based on historical information about redemption rate of award points. Fair value of the points issued is deferred and recognized as revenue when the points are redeemed or expired.
      2. Expenses
        Expenses are recognized as they are incurred.
  2. Employee benefits
    1. Short-termemployee benefits

    2. All short-term employee benefits which consist of salaries and related benefits, vacation pay, incentives and other short-term benefits are recognized as expense on undiscounted basis when employees have rendered service to the Group.
    3. Post-employmentbenefit plans and other long-term employee benefits

    4. Post-employment benefit plans consist of funded and unfunded defined benefit pension plans, defined contribution pension plan, other post-employment benefits, post-employment health care benefit plan, defined contribution health care benefit plan and obligations under the Labor Law.
      Other long-term employee benefits consist of Long Service Awards ("LSA"), Long Service Leave ("LSL"), and pre-retirement benefits.
      The cost of providing benefits under post-employment benefit plans and other long-term employee benefits calculation is performed by an independent actuary using the projected unit credit method.
      The net obligations in respect of the defined pension benefit plans and post-retirement health care benefit plans are calculated at the present value of estimated future benefits that the employees have earned in return for their service in the current and prior periods less the fair value of plan assets. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of Government bonds that are denominated in the currencies in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement benefit obligation. Government bonds are used as there are no deep markets for high quality corporate bonds.

30

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) s. Employee benefits (continued)

  1. Post-employmentbenefit plans and other long-term employee benefits (continued)
    Plan assets are assets owned by defined benefit pension plan and post-retirement health care benefits plan as well as qualifying insurance policy. The assets are measured at fair value as of reporting dates. The fair value of qualifying insurance policy is deemed to be the present value of the related obligations (subject to any reduction required if the amounts receivable under the insurance policies are not recoverable in full).
    Remeasurement, comprising of actuarial gain and losses, the effect of the asset ceiling (excluding amounts included in net interest on the net defined benefit liability (asset)) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability (asset)) are recognized immediately in the consolidated statements of financial position with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
    Past service costs are recognized immediately in profit or loss on the earlier of:
    1. The date of plan amendment or curtailment; and
    2. The date that the Group recognized restructuring-related costs.

Net interest is calculated by applying the discount rate to the net defined benefit liability or assets.

Gains or losses on curtailment are recognized when there is a commitment to make a material reduction in the number of employees covered by a plan or when there is an amendment of defined benefit plan terms such as that a material element of future services to be provided by current employees will no longer qualify for benefits, or will qualify only for reduced benefits.

Gains or losses on settlement are recognized when there is a transaction that eliminates all further legal or constructive obligation for part or all of the benefits provided under a defined benefit plan (other than the payment of benefit in accordance with the program and included in the actuarial assumptions).

For defined contribution plans, the regular contributions constitute net periodic costs for the period in which they are due and, as such, are included in "Personnel Expenses" as they become payable.

  1. Share-basedpayments
    The Company operates an equity-settled,share-based compensation plan. The fair value of the employee's services rendered which are compensated with the Company's shares is recognized as an expense in the consolidated statements of profit or loss and other comprehensive income and credited to additional paid-in capital at the grant date.
  2. Early retirement benefits

Early retirement benefits are accrued at the time the Group makes a commitment to provide early retirement benefits as a result of an offer made in order to encourage voluntary redundancy. A commitment to a termination arises when, and only when a detailed formal plan for the early retirement cannot be withdrawn.

  1. Taxes Income tax
    Current and deferred income taxes are recognized as income or an expense and included in the consolidated statements of profit or loss and other comprehensive income, except to the extent that the tax arises from a transaction or event which is recognized directly in equity, in which case, the tax is recognized directly in equity.

31

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Taxes (continued) Income tax (continued)
    Current income tax assets and liabilities are measured at the amounts expected to be recovered or paid using the tax rates and tax laws that have been enacted or substantively enacted at each reporting date. Management periodically evaluates positions taken in Annual Tax Returns ("Surat Pemberitahuan Tahunan"/ "SPT Tahunan") with respect to situations in which applicable tax regulation is subject to interpretation. Where appropriate, management establishes provisions based on the amounts expected to be paid to the Tax Authorities.
    Tax assessment
    Amendment to taxation obligation is recorded when an assessment letter ("Surat Ketetapan Pajak" or "SKP") is received or, if appealed against, when the results of the appeal are determined. The additional taxes and penalty imposed through an SKP are recognized in the current year profit or loss, unless objection/appeal is taken. The additional taxes and penalty imposed through the SKP are deferred as long as they meet the asset recognition criteria. The changes due to an error will be disclosed in accordance with PSAK 25: Accounting Policies, Changes in Accounting Estimates and Error
    Deferred tax
    The Group recognizes deferred tax assets and liabilities for temporary differences between the financial and tax bases of assets and liabilities at each reporting date. The Group also recognizes deferred tax assets resulting from the recognition of future tax benefits, such as the benefit of tax losses carried forward to the extent their future realization is probable. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates and tax laws at each reporting date which are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
    The carrying amount of deferred tax assets is reviewed at each reporting date and reduced if there is no longer probable that sufficient taxable profit will be available to compensate part or all of the benefits of deferred tax assets. Unrecognized deferred tax assets are reassessed at each reporting date and recognized if it is probable that future taxable profits will be available for recovery. Tax deductions arising from the reversal of deferred tax assets are excluded from estimates of future taxable income.
    Deferred tax transactions which are recognized outside profit or loss are recognized outside profit or loss. Therefore, deferred taxes on these transactions are recognized either in other comprehensive income or recognized directly in equity.
    Deferred tax assets and liabilities are offset in the consolidated statements of financial position, if and only if it has a legally enforceable right to set off current tax assets and liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same Tax Authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
    Value added tax ("VAT")
    Revenues, expenses and assets are recognized net of the VAT amount except:
    1. VAT arising from the purchase of assets or services that cannot be credited by the Tax Office, which VAT is recognized as part of the acquisition cost of the asset or as part of the applied expenses; and
    2. Receivables and payables are presented including the amount of VAT.

32

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Taxes (continued) Uncertainty over income tax
    In accordance with ISAK 34: Uncertainty Over Income Tax Treatments which is effective on January 1, 2019, stated that the recognition and measurement of tax assets and liabilities that contain uncertainty over income tax are determined by considering whether to be treated separately or together, the assumptions used in the examination of tax treatments by the Tax Authorities, consideration the probability that the Tax Authorities will accept uncertain tax treatment and re-consideration or estimation if there is a change in facts and circumstances.
    If the acceptation of tax treatment is probable, the measurement is in line with income tax fillings. If the acceptation of tax treatment is not probable, the Group uses tax amounts using the method that provides the better predict of resolution (i.e. most likely amount or expected value).
    Accordingly, management believes that the interpretation did not have a significant impact on the consolidated financial statements.
    Final tax
    Indonesian tax regulations impose final tax on several types of transactions based on the gross value of the transaction. Therefore, final tax which is charged based on such transaction remains subject to tax even though the tax payer incurred a loss on the transaction.
    Final tax on construction services and lease is presented as part of "Other Income (Expenses) - net".
  2. Financial instruments
    The Group classifies financial instruments into financial assets and financial liabilities. A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. The group adopted PSAK 71 as at January 1, 2020
    1. Financial assets
      Initial recognition and measurement
      Financial assets are classified, at initial recognition, and subsequently measured at amortized cost, fair value through OCI ("FVTOCI"), and fair value through profit or loss ("FVTPL").
      The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing component of for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL, transactions costs. Trade receivables that do not contain a significant financing component or which the Group has applied the practical expedient are measured at the transaction price determined under PSAK 72.
      In order for a financial asset to be classified and measured at amortized cost or FVTOCI, it needs to give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. This assessment is referred to as the solely payments of principal and interest (SPPI) testing and it is performed at instrument level.
      The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
      Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Group commits to buy or sell the asset.

33

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u. Financial instruments (continued)

  1. Financial assets (continued) Subsequent measurement
    For purposes of subsequent measurement, financial assets are classified in four categories:
    1. Financial assets at amortized cost (debt instruments)
      This category is the most relevant to the Group. The Group measures financial assets at amortized cost if both of the following conditions are met:
      • The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and
      • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortized cost are subsequently measured using the effective interest rate ("EIR") method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired. The Group's financial assets at amortized cost consist of cash and cash equivalents, other current financial assets, trade and other receivables, and other non-current assets.

  1. Financial assets at FVTOCI with recycling of cumulative gains and losses (debt instruments)
    The Group measures debt instruments at FVTOCI if both of the following conditions are met:
    • The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; and
    • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

For debt instruments at FVTOCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognized in the statement of profit or loss and computed in the same manner as for financial assets measured at amortized cost. The remaining fair value changes are recognized in OCI. Upon derecognition, the cumulative fair value change recognized in OCI is recycled to profit or loss.

The Group have no debt instruments classified at FVTOCI with recycling of cumulative gains and losses as of September 30, 2020.

  1. Financial assets designated at FVTOCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)
    Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at FVTOCI when they meet the definition of equity under PSAK 71 and are not held for trading. The classification is determined on an instrument- by-instrument basis. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognized as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at FVTOCI are not subject to impairment assessment. There's no equity investments elected under this category as of September 30, 2020.

34

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u. Financial instruments (continued)

  1. Financial assets (continued) Subsequent measurement (continued)d. Financial assets at FVTPL

  2. Financial assets at FVTPL include financial assets held for trading, financial assets designated upon initial recognition at FVTPL, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not fulfilled with solely payments of principal and interest (SPPI) testing are classified and measured at FVTPL, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortized cost or at FVTOCI, as described above, debt instruments may be designated at FVTPL on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at FVTPL are carried in the statement of financial position at fair value with net changes in fair value recognized in the statement of profit or loss. The Group's financial assets at FVTPL consists of equity investments, other long-term investments, mutual funds, and convertible bonds.

Expected credit losses ("ECL")

The Group recognizes an allowance for ECL for all debt instruments not held at FVTPL. ECL are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECL are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECL are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECL. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECL at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

For debt instruments at FVTOCI, the Group applies the low credit risk simplification. At every reporting date, the Group evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group reassesses the external credit rating of the debt instrument. In addition, the Group considers that there has been a significant increase in credit risk when contractual payments are more than 30 days past due.

The Group's debt instruments at FVTOCI comprise solely of quoted bonds that are graded in the top investment category (Very Good and Good) by the Good Credit Rating Agency and, therefore, are considered to be low credit risk investments. It is the Group's policy to measure ECL on such instruments on a 12-month basis. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. The Group uses the ratings from the Good Credit Rating Agency both to determine whether the debt instrument has significantly increased in credit risk and to estimate ECL.

35

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u. Financial instruments (continued)

  1. Financial assets (continued)
    Expected credit losses ("ECL") (continued)
    The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. Trade receivables is written off when there is low possibility of recovering the contractual cash flow, after all collection efforts have been done and have been fully provided for allowance.
  2. Financial liabilities
    Initial recognition and measurement
    Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
    All financial liabilities are recognized initially at fair value and, in the case of loan and borrowings and payables, net of directly attributable transaction costs.
    The Group classifies its financial liabilities as: (i) financial liabilities at FVTPL or (ii) financial liabilities measured at amortized cost.
    The Group's financial liabilities include trade and other payables, accrued expenses, interest-bearing loans, other borrowings and other liabilities. Interest-bearing loans consist of short-term bank loans, two-step loans, bonds and notes, long-term bank loans, and obligations under finance leases.
    Subsequent measurement
    The measurement of financial liabilities depends on their classification, as described below: a. Financial liabilities at FVTPL

Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVTPL. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in the statement of profit or loss.

Financial liabilities designated upon initial recognition at FVTPL are designated at the initial date of recognition, and only if the criteria in PSAK 71 are satisfied. The Group has not designated any financial liability as at FVTPL.

  1. Financial liabilities measured at amortized cost
    This is the category most relevant to the Group. After initial recognition, interest-bearing loans and other borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortisation process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. This category generally applies to interest-bearing loans and other borrowings. For more information, refer to Note 19 Long-Term Loans and Other Borrowings.

36

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u. Financial instruments (continued)

iii. 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 them on a net basis, or realize the assets and settle the liabilities simultaneously. The right of set-off must not be contingent on a future event and must be legally enforceable in all of the following circumstances:

    1. the normal course of business;
    2. the event of default; and
    3. the event of insolvency or bankruptcy of the Group and all of the counterparties.
  1. Derecognition of financial instruments
    The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or when the Group transfers substantially all the risks and rewards of ownership of the financial asset.
    The Group derecognizes a financial liability when the obligation specified in the contract is discharged or cancelled or has expired.
  2. Hedge Accounting
    The Group does not apply hedge accounting.

Accounting policy for financial instruments applied until December 31, 2019

The Group classifies financial instruments into financial assets and financial liabilities. A Financial assets and liabilities are recognized initially at fair value including transaction costs. These are subsequently measured either at fair value or amortized cost using the effective interest method in accordance with their classification.

i. Financial assets

The Group classifies its financial assets as (i) financial assets at fair value through profit or loss,

  1. loans and receivables, (iii) held-to-maturity investment or (iv) available-for-sale financial assets. The classification depends on the purpose for which the financial assets are acquired. Management determines the classification of financial assets at initial recognition.

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

The Group's financial assets include cash and cash equivalents, other current financial assets, trade receivables and other receivables, other non-current financial assets, and available-for-sale investments.

  1. Financial assets at fair value through profit or loss
    Financial assets at fair value through profit or loss are financial assets classified as held for trading. A financial asset is classified as held for trading if it is acquired principally for the purpose of selling or repurchasing it in the near term and for which there is evidence of a recent actual pattern of short-term profit taking. Gains or losses arising from changes in fair value of the trading securities are presented as other income (expense) in consolidated statements of profit or loss and other comprehensive income in the period in which they arise.

37

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Financial instruments (continued)
    Accounting policy for financial instruments applied until December 31, 2019 (continued)
    1. Financial assets (continued)
      1. Loans and receivables
        Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
        Loans and receivables consist of, among other, cash and cash equivalents, other current financial assets, trade and other receivables, and other non-current assets (long-term trade receivables and restricted cash).
        These are initially recognized at fair value including transaction costs and subsequently measured at amortized cost, using the effective interest method.
      2. Held-to-maturityinvestments
        Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities on which management has the positive intention and ability to hold to maturity, other than:
        • those that the Group, upon initial recognition, designates as at fair value through profit or loss;
        • those that the Group designates as available-for-sale; and
        • those that meet the definition of loans and receivables.
      3. Available-for-salefinancial assets
        Available-for-sale investments are non-derivative financial assets that are intended to be held for indefinite periods of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Available- for-sale investments primarily consist of mutual funds, corporate and government bonds and capital stock, which are recorded as part of "Other current financial assets" and "Long-term investments" in the consolidated statements of financial position.

Available-for-sale investments are stated at fair value. Unrealized holding gains or losses on available-for-sale investments are excluded from income of the current period and are reported as a separate component in the equity section of the consolidated statements of financial position until realized. Realized gains or losses from the sale of available-for-sale investments are recognized in the consolidated statements of profit or loss and other comprehensive income, and are determined on the specific identification basis.

Impairment of financial assets

The Group assesses the impairment of financial assets if there is objective evidence that a loss event has a negative impact on the estimated future cash flows of the financial assets. Impairment is recognized when the loss can be reliably estimated. Losses expected as a result of future events, no matter how likely, are not recognized.

For financial assets carried at amortized cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a Group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in the collective assessment of impairment.

38

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Financial instruments (continued)
    Accounting policy for financial instruments applied until December 31, 2019 (continued)
    1. Financial assets (continued)

    Impairment of financial assets (continued)

    The amount of any impairment loss identified is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognized in profit or loss.

    For available-for-sale financial assets, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. When a decline in the fair value of an available-for-sale financial asset has been recognized in other consolidated comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized in other consolidated comprehensive income is recognized in profit or loss as an impairment loss. The amount of the cumulative loss is the difference between the acquisition cost (net of any principal repayment and amortization) and current fair value, less any impairment loss on that financial asset previously recognized.

    1. Financial liabilities

    The Group classifies its financial liabilities as (a) financial liabilities at fair value through profit or loss or (b) financial liabilities measured at amortized cost.

    The Group's financial liabilities include trade and other payables, accrued expenses, interest- bearing loans, other borrowings and other liabilities. Interest-bearing loans consist of short-term bank loans, two-step loans, bonds and notes, long-term bank loans, and obligations under finance leases.

      1. Financial liabilities at fair value through profit or loss
        Financial liabilities at fair value through profit or loss are financial liabilities classified as held for trading. A financial liability is classified as held for trading if it is incurred principally for the purpose of selling or repurchasing it in the near term and for which there is evidence of a recent actual pattern of short-term profit taking.
      2. Financial liabilities measured at amortized cost
        Financial liabilities that are not classified as liabilities at fair value through profit or loss fall into this category and are measured at amortized cost. Financial liabilities measured at amortized cost are trade and other payables, accrued expenses, interest-bearing loans, other borrowings, and other liabilities. Interest-bearing loans consist of short-term bank loans, two-step loans, bonds and notes, long-term bank loans, and obligations under finance leases.
    1. 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 them on a net basis, or realize the assets and settle the liabilities simultaneously. The right of set-off must not be contingent on a future event and must be legally enforceable in all of the following circumstances:
      1. the normal course of business;
      2. the event of default; and
      3. the event of insolvency or bankruptcy of the Group and all of the counterparties.

39

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u. Financial instruments (continued)

iv. Fair value of financial instruments

Fair value is the amount for which an asset could be exchanged, or liability settled, in an arm's length transaction.

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices, without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm's length market transactions, reference to the current fair value of another instrument that is substantially the same, a discounted cash flow analysis or other valuation models.

    1. Derecognition of financial instrument
      The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or when the Group transfers substantially all the risks and rewards of ownership of the financial asset.
      The Group derecognizes a financial liability when the obligation specified in the contract is discharged or cancelled or has expired.
  1. Sukuk Ijarah
    Sukuk Ijarah issued by the Group is recognized at nominal value, adjusted to the premium or discount and related transaction costs. The difference between the carrying amount and the nominal value is amortized on a straight-line basis over the period of the sukuk and is recognized in the income statement as the sukuk issuance expense.
    Sukuk Ijarah, after adjusting for premium or discount and unamortized transaction costs, is presented as part of liabilities.
  2. Treasury stock

Reacquired Company shares of stock are accounted for at their reacquisition cost and classified as "Treasury Stock" and presented as a deduction in equity. The cost of treasury stock sold/transferred is accounted for using the weighted average method. The portion of treasury stock transferred for employee stock ownership program is accounted for at its fair value at grant date. The difference between the cost and the proceeds from the sale/transfer of treasury stock is credited to "Additional Paid-in Capital".

  1. Dividends
    Dividend for distribution to the stockholders is recognized as a liability in the consolidated financial statements in the year in which the dividend is approved by the stockholders. The interim dividend is recognized as a liability based on the Board of Directors' decision supported by the approval from the Board of Commissioners.
  2. Basic and diluted earnings per share and earnings per ADS
    Basic earnings per share is computed by dividing profit for the year attributable to owners of the parent company by the weighted average number of shares outstanding during the year. Income per ADS is computed by multiplying the basic earnings per share by 100, the number of shares represented by each ADS.
    The Company does not have potentially dilutive financial instruments.

40

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

  1. Segment information
    The Group's segment information is presented based upon identified operating segments. An operating segment is a component of an entity:
    1. that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity);
    2. whose operating results are regularly reviewed by the Group's Chief Operating Decision Maker ("CODM") i.e., the Directors, to make decisions about resources to be allocated to the segment and assess its performance; and
    1. for which discrete financial information is available.
  1. Provisions
    Provisions are recognized when the Group has present obligations (legal or constructive) arising from past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and the amount can be measured reliably.

Provisions for onerous contracts are recognized when the contract becomes onerous for the lower of the cost of fulfilling the contract and any compensation or penalties arising from failure to fulfill the contract.

ab. Impairment of non-financial assets

At the end of each reporting period, the Group assesses whether there is an indication that an asset may be impaired. If such indication exists, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the Cash-Generating Unit ("CGU") to which the asset belongs ("the asset's CGU").

The recoverable amount of an asset (either individual asset or CGU) is the higher of the asset's fair value less costs to sell and its value in use ("VIU"). Where the carrying amount of the asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing the value in use, the estimated net future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, the Group uses an appropriate valuation model to determine the fair value of the asset. These calculations are corroborated by valuation multiples or other available fair value indicators.

Impairment losses of continuing operations are recognized in profit or loss as part of "Depreciation and Amortisation" in the consolidated statements of profit or loss and other comprehensive income.

At the end of each reporting period, the Group assesses whether there is any indication that previously recognized impairment losses for an asset, other than goodwill, may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss for an asset, other than goodwill, is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited such that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment been recognized for the asset in prior periods. Reversal of an impairment loss is recognized in profit or loss.

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment loss relating to goodwill can not be reversed in future periods.

41

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ac. Current and non current classifications

The Group presents assets and liabilities in the statement of financial position based on current/non- current classification. An asset is presented current when it is:

  1. expected to be realized or intended to be sold or consumed in the normal operating cycle;
  2. held primarily for the purpose of trading;
  3. expected to be realized within twelve months after the reporting period; or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for a least twelve months after the reporting period.

Asset which do not meet above criterias, classified as non current assets.

A liability is current when:

  1. it is expected to be settled in the normal operating cycle;
  2. it is held primarily in the proposed of trading;
  3. it is due to be settled within twelve months after reporting period;
  4. there is no unconditional right after deferred the settlement of the liability for at least twelve months after the reporting period.

The terms of liability that could, at the option of counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Liabilities which do not meet above criterias, classified as long term liabilities. Deffered tax assets and liabilities are classified as non-current assets and liabilities.

ad. Changes in accounting policy and disclosures

PSAK 71

The Group has applied PSAK 71 modified retrospective approach on the required effective date, January 1, 2020. The 2020 opening balances have been adjusted, but the previous periods have not been restated. Some of the key changes that impacted the Group include the following:

  1. Classification and measurement
    Under PSAK 71, the Group classifies its financial assets as at amortized cost, at FVTPL, and at FVTOCI. Previously under PSAK 55, its classified as loan and receivables and available for sale. The classification is based on two criteria: the Group's business model for managing the assets; and whether the instruments' contractual cash flows represent solely payments of principal and interest on the principal amount outstanding.
    The assessment of the Group's business model was made as of the date of initial application, January 1, 2020, and then applied retrospectively to those financial assets that were not derecognized before January 1, 2020. The assessment of whether contractual cash flows on debt instruments are solely payments of principal and interest was made based on the facts and circumstances as at the initial recognition of the assets.

The classification and measurement requirements of PSAK 71 have an impact on some of the Group's available for sale financial assets as they have to be measured at FVTPL as the instruments' contractual cash flow does not represent solely payments of principal and interest. The Group continued measuring at amortized cost for all financial assets previously classified as loans and receivables under PSAK 55 (2013).

42

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ad. Changes in accounting policy and disclosures (continued)

PSAK 71 (continued)

  1. Classification and measurement (continued)
    The table below illustrates the classification and measurement of financial assets under PSAK
    71 and PSAK 55 at the date of initial application, January 1, 2020:

Original measurement

New measurement

Cash and cash equivalents

category under PSAK 55

category under PSAK 71

Loans and receivables

Amortized cost

Trade receivables

Loans and receivables

Amortized cost

Convertible bonds

Available for sale

FVTPL

Debt instruments

Available for sale

FVTOCI

Equity investments

Available for sale

FVTPL

  1. Impairment
    The adoption of PSAK 71 has fundamentally changed the Group's accounting for impairment losses for financial assets by replacing PSAK 55's incurred loss approach with a forward- looking ECL approach. PSAK 71 requires the Group to recognise an allowance for ECL for all debt instruments not held at FVTPL and contract assets.

PSAK 72

The Group has adopted PSAK 72 from January 1, 2020 using the modified retrospective approach, which means the Group elected not to restate comparative figures but any adjustments to the carrying amounts at transition date were recognized in the opening balance of retained earnings and non-controlling interest. Some of the key changes that impacted the Group include the following:

  • Based on the new requirements under PSAK 72, contract assets and contract liabilities have been added as new lines in the consolidated statements of financial position. Previously, contract assets were reported as trade receivables and contract liabilities were reported as unearned income.
  • Contract costs that consist of costs to obtain and fulfill the contract have been added as new line in the consolidated statement of financial position. Previously, these contract costs were expensed as incurred or amortized with systematic basis that is inconsistent with the recognition of related revenue.
  • Revenues from contracts with customers which measured under PSAK 72 are separately presented from revenues from other sources.

In the transition date of PSAK 72, the application of variable consideration and timing of revenue recognition principle results in the Group recognized an increase in retained earnings as the amount of revenue recognized for the completed performance obligation under PSAK 72 is greater than the revenue recognized under the previous revenue standard. In return, the Group recognizes contract assets as the Group's right to consideration in exchange for the completed performance obligation. The contract assets are subsequently reclassified as trade receivables when the consideration becomes unconditional.

The Group also recognizes capitalisation of incremental costs of obtaining and fulfilling the contracts with customers. In contrast to the previous standards that required the Group to expense these costs as incurred, the capitalised contract costs are now amortized on a consistent basis with the transfer to the customer of the goods or services to which the contract costs relate.

43

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ad. Changes in accounting policy and disclosures (continued)

PSAK 73

The Group has applied PSAK 73 using modified retrospective approach on the required effective date, January 1, 2020. The 2019 opening balances have been adjusted, but the previous periods have not been restated. Some of the key changes that impacted the Group include the following:

  1. Right-of-useassets and lease liabilities
    Adoption of PSAK 73 resulted in the Group's future minimum lease payments under non- cancellable operating leases to be recognized as lease liabilities with corresponding Right-of-Use ("ROU") assets.
    Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 January 2020. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2020 was 7.41%.
  2. Sublease
    The Group has reclassified certain of its sublease agreements as finance leases. The portion of the ROU assets subject to sublease is de-recognized and a sublease receivable is recognized in the balance sheet when the sublease commences.

The effect of adopting PSAK 71, PSAK 72, and PSAK 73 were as follows:

ASSETS

PSAK 71,72, and 73

Trade receivables - net provision for impairment

of receivables

(1,134)

Contract assets

969

Other receivables - net provision for impairment

of receivables

(24)

Contract cost

1,185

Other current assets

(1,403)

Long-term investments

244

Property and equipment - net of accumulated depreciation

(2,154)

ROU assets

20,541

Deferred tax assets

(87)

Other non-current assets

(3,170)

14,967

LIABILITIES

Accrued expenses

87

Unearned income - current

903

Contract liabilities

(1,065)

Deferred tax liabilities

(41)

Unearned income - net of current portion

83

Long-term borrowings - net of current maturities

(14,425)

(14,458)

EQUITY

Other equity

48

Retained earnings - unappropriated

(606)

Non-controlling Interests

50

(508)

44

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ad. Changes in accounting policy and disclosures (continued)

The impact of the changes to the current period financial statements is as follow:

Previous

STATEMENT OF FINANCIAL POSITION

New standard

standard

Adjusment

ASSETS

Cash and cash equivalents

17,420

17,420

(0)

Trade receivables - net provision for impairment

of receivables

12,721

13,821

(1,100)

Contract asset

822

-

822

Other receivables - net provision for impairment

of receivables

237

324

(87)

Contract cost

441

-

441

Other current assets

3,560

4,796

(1,236)

Long-term investments

2,052

1,829

223

Property and equipment - net of accumulated

depreciation

156,641

158,795

(2,154)

Right-of-use assets

17,760

-

17,760

Deferred tax assets - net

2,975

3,062

(87)

Contract asset - nettoff current portion

295

-

295

Contract cost - nettoff current portion

1,312

-

1,312

Other non-current assets

4,805

7,708

(2,903)

TOTAL ASSETS

221,041

207,756

13,285

LIABILITIES

Accrued expenses

13,684

14,195

511

Unearned income

631

5,762

5,131

Contract liabilities

6,801

-

(6,801)

Short-term loans and current maturities

of long-term borrowings

12,209

7,576

(4,633)

Deferred tax liabilities

749

697

(52)

Contract liabilities - netoff current portion

1,025

-

(1,025)

Long-term loans and other borrowings

40,044

33,459

(6,585)

TOTAL LIABILITIES

75,143

61,688

(13,455)

EQUITY

Other equity

541

589

48

Retained earnings

78,175

78,121

(54)

Non-controlling Interests

16,172

16,348

176

TOTAL EQUITY

94,888

95,058

170

STATEMENT OF PROFIT OR LOSS

REVENUES

99,941

99,897

(44)

Operations, maintenance and telecommunication

service

(25,098)

(27,570)

(2,472)

Depreciation and amortization

(21,038)

(18,007)

3,031

General and administrative

(4,234)

(4,206)

28

Marketing

(2,356)

(2,787)

(431)

Other income (expenses) - net

465

455

(10)

Finance income

644

562

(82)

Finance costs

(3,457)

(2,810)

647

Tax effect

575

586

11

OTHER COMPREHENSIVE INCOME (EXPENSES)

Net (loss) gain on available for sale

financial assets

-

1

1

Profit for the year attributable to:

Owners of the parent company

16,679

17,231

552

Non-controlling interests

6,272

6,398

126

45

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ad. Changes in accounting policy and disclosures (continued)

The impact of the changes to the current period financial statements is as follow (continued):

(In billions of

STATEMENT OF CASHFLOWS

Indonesia Rupiah)

Net cash flows from operating activities (PSAK 30R)

Operating lease payments

(2,065)

Net cash flows from financing activities (PSAK 73)

Payment of principal portion of lease liabilities

(4,541)

ae. Critical accounting considerations, estimates and assumptions

The preparation of the Group's consolidated financial statements requires management to make decisions, estimates and assumptions that affect the amount of revenue, expenses, assets and liabilities reported, and the accompanying disclosures, and disclosures of contingent liabilities, at the end of the reporting period.

Uncertainty about these assumptions and estimates can produce results that require a material adjustment to the carrying amounts of assets and liabilities affected in the coming periods.

  1. Consideration
    The following considerations were made by management in applying the Group's accounting policies that have the most significant influence on the amounts recognized in the consolidated financial statements:
    Income taxes
    Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the year in which such determination is made. Details of the nature and carrying amounts of income tax are disclosed in Note 28.
  2. Estimates and assumptions
    Estimates and assumption are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
    The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
    1. Retirement benefits

The present value of the retirement benefit 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 return on investment (ROI). Any changes in these assumptions will impact the carrying amount of the retirement benefit obligations.

46

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ae. Critical accounting considerations, estimates and assumptions (continued)

  1. Estimates and assumptions (continued)
    1. Retirement benefits (continued)
      The Group determines the appropriate discount rate at the end of each reporting period. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the obligations. In determining the appropriate discount rate, the Group 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 retirement benefit obligations.
      If there is an improvement in the ratings of such Government bonds or a decrease in interest rates as a result of improving economic conditions, there could be a material impact on the discount rate used in determining the post-employment benefit obligations.
      Other key assumptions for retirement benefit obligations are based in part on current market conditions. Additional information is disclosed in Notes 31 and 32.
    2. Useful lives of property and equipment
      The Group estimates the useful lives of its property and equipment based on expected asset utilization, considering strategic business plans, expected future technological developments and market behavior. The estimates of useful lives of property and equipment are based on the Group's collective assessment of industry practice, internal technical evaluation, and experience with similar assets.
      The Group reviews its estimates of useful lives at least each financial year-end and such estimates are updated if expectations differ from previous estimates due to changes in expectation of physical wear and tear, technical or commercial obsolescence, and legal or other limitations on the continuing use of the assets. The amounts of recorded expenses for any year will be affected by changes in these factors and circumstances. A change in the estimated useful lives of the property and equipment is a change in accounting estimates and is applied prospectively in profit or loss in the period of the change and future periods.
      Details of the nature and carrying amounts of property and equipment are disclosed in Note 11.
    3. Determining the lease term of contracts with renewal and termination options - Group as lessee
      The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
      The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate.

47

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ae. Critical accounting considerations, estimates and assumptions (continued)

  1. Estimates and assumptions (continued)
    1. Credit loss provision for financial assets
      For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established a credit provision methodology that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors, and the economic environment.
      For term deposits and debt instruments at fair value through OCI, the Group applies the low credit risk simplification. At every reporting date, the Group evaluates whether the deposits or debt instrument are considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group reassesses the internal credit rating of the instrument. In addition, the Group considers that there has been a significant increase in credit risk when contractual payments are more than 30 days past due.
      The Group assesses whether there is objective evidence that other receivables or other financial assets have been impaired at the end of each reporting period. Provision for impairment of receivables is calculated based on a review of the current status of existing receivables and historical collection experience. Such provisions are adjusted periodically to reflect the actual and anticipated experience. Details of the nature and carrying amounts of provision for impairment of other receivables are disclosed in Note 5.
    2. Revenue
      1. Critical judgements in determining the performance obligation, timing of revenue recognition and revenue classification
        The Group provides information technology services that are bespoke in nature. Bespoke products consist of various goods and/or services bundled together in order to provide integrated solution services to customers. In addition to the bespoke service, Group also provide multiple standard product as bundling product in contract with customer. Significant judgment is required in determining the number and nature of performance obligations promised to customers in those contracts. The number and nature of performance obligations will determine the timing of revenue recognition for such contract.
        The Group reviews the determination of performance obligations on a contract-by- contract basis. When a contract consisting of several goods and/or service is assessed to have one performance obligations, the Group applies a single method of measuring progress for the performance obligation based on the measurement method that best depicts the economics of the contract, which in most cases is over time.
        The Group also presents the revenue classification using consistent approach. When a contract consisting of several goods and/or service is assessed to have one performance obligations, the Group presents that performance obligations in one financial statement line items which best represent the main service of the Group, which in most cases is the internet, data communication and information technology services.

48

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ae. Critical accounting considerations, estimates and assumptions (continued)

  1. Estimates and assumptions (continued)
    1. Revenue (continued)
      1. Critical judgements in determining the stand-alone selling price
        The Group provides wide array of products related to telecommunication and technology. To determine the stand-alone selling price for goods and/or services that do not have any readily available observable price, the Group uses the expected cost- plus margin approach.
        Significant judgment is required in determining the margin for each contract that contains goods and/or services with an unobservable price. The Group currently determines the appropriate margin based on historical achievement and information from an independent party.
    2. Test for impairment of non-current assets and goodwill
      The application of the acquisition method in a business combination requires the use of accounting estimates in allocating the purchase price to the fair market value of the assets and liabilities acquired, including intangible assets. Certain business acquisitions by the Group resulted goodwill, which is not amortized but is tested for impairment annually and every indication of impairment exists.
      The calculation of future cash flows in determining the fair value of fixed assets and other non-current assets of entities acquired at the acquisition date with significant estimates. Although management believes that the assumptions used are appropriate, significant changes to those assumptions can materially affect the evaluation of recoverable amounts and may result in impairment according to PSAK 48: Impairment of Assets.
    3. Acquisition
      The Group evaluates each acquisition transaction to determine whether it will be treated as an asset acquisition or business combination. For transactions that are treated as an asset acquisition, the purchase price is allocated to the assets obtained, without the recognition of goodwill. For acquisitions that meet the business combination definition, the Group applies the accounting acquisition method for assets acquired and liabilities assumed are recorded at fair value at the acquisition date, and the results of operations are included with the Group's results from the date of each acquisition.
      Any excess from the purchase price paid for the amount recognized for assets acquired and liabilities incurred is recorded as goodwill. The Group continues to evaluate acquisitions that are counted as a business combination for a period not exceeding one year after the applicable acquisition date of each transaction to determine whether additional adjustments are needed to allocate the purchase price paid for the assets acquired and liabilities assumed. The fair value of assets acquired and liabilities incurred are usually determined using either an estimated replacement cost or a discounted cash flow valuation method. When determining the fair value of tangible assets acquired, the Group estimates the cost of replacing assets with new assets by considering factors such as the age, condition and economic useful lives of the assets. When determining the fair value of the intangible assets obtained, the Group estimates the applicable discount rate and the time and amount of future cash flows, including the rates and terms for the extension and reduction.

3.

49

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

3. CASH AND CASH EQUIVALENTS

September 30, 2020

December 31, 2019

Balance

Balance

Foreign

Foreign

currency

Rupiah

currency

Rupiah

Currency

(in millions)

equivalent

(in millions)

equivalent

Cash on hand

Rp

-

40

-

37

Cash in banks

Related parties

PT Bank Mandiri (Persero) Tbk. ("Bank Mandiri")

Rp

-

983

-

1,407

US$

15

225

9

122

EUR

2

27

1

23

HKD

1

2

0

1

JPY

1

0

1

0

AUD

0

0

0

0

PT Bank Negara Indonesia (Persero) Tbk. ("BNI")

Rp

-

1,096

-

1,033

US$

2

33

6

86

SGD

0

0

0

0

EUR

-

-

0

0

PT Bank Rakyat Indonesia (Persero) Tbk. ("BRI")

Rp

-

166

-

198

US$

1

17

3

44

PT Bank Tabungan Negara (Persero) Tbk. ("BTN")

Rp

-

54

-

51

Others

Rp

-

13

-

20

US$

0

0

0

0

Sub-total

SGD

0

0

-

-

2,616

2,985

Third parties

The Hongkong and Shanghai Banking

Corporation Ltd. ("HSBC Hongkong")

US$

19

286

14

188

HKD

6

11

6

10

PT Bank CIMB Niaga Tbk. ("Bank CIMB Niaga")

Rp

-

288

-

33

US$

0

1

0

0

Mega International Commercial Bank Co., Ltd.

MYR

2

5

-

-

("Mega ICBC")

US$

15

221

2

24

TWD

30

15

27

12

PT Bank Permata Tbk ("Bank Permata")

Rp

-

124

-

335

US$

-

-

4

62

Standard Chartered Bank ("SCB")

Rp

-

0

-

0

US$

6

87

11

150

SGD

7

70

1

7

PT Bank Pembangunan Daerah ("BPD")

Rp

-

110

-

121

PT Bank HSBC Indonesia ("HSBC")

Rp

-

3

-

3

Others (each below Rp75 billion)

Rp

-

254

-

401

US$

18

267

6

89

MYR

16

56

4

12

SGD

1

7

0

3

EUR

0

7

1

17

TWD

0

0

0

1

AUD

0

3

1

7

MOP

0

1

0

1

Sub-total

HKD

0

0

0

0

1,816

1,476

Total cash in banks

4,432

4,461

Time deposits

Related parties

BNI

Rp

-

2,299

-

2,693

US$

54

802

32

450

BRI

Rp

-

2,238

-

2,561

US$

44

646

36

500

Bank Mandiri

Rp

-

2,254

-

1,129

US$

36

540

16

215

BTN

Rp

-

1,900

-

2,733

Sub-total

US$

-

-

4

49

10,679

10,330

50

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

3. CASH AND CASH EQUIVALENTS (continued)

September 30, 2020

Balance

December 31, 2019

Balance

Foreign

Foreign

currency

Rupiah

currency

Rupiah

Time deposits (continued)

Currency

(in millions)

equivalent

(in millions)

equivalent

Third parties

PT Bank Pembangunan Daerah Jawa Barat

dan Banten Tbk ("BJB")

Rp

-

736

-

1,394

US$

6

85

-

-

PT Bank Maybank Indonesia Tbk. ("Maybank")

Rp

-

35

-

14

US$

35

522

5

70

PT Bank Mega Tbk ("Bank Mega")

Rp

-

226

-

400

PT Bank CIMB Niaga Tbk

("Bank CIMB Niaga")

Rp

-

132

-

992

US$

5

75

29

398

PT Bank Danamon Tbk. ("Bank Danamon")

Rp

-

173

-

1

PT Bank Tabungan Pensiunan Nasional Tbk. ("BTPN")

Rp

-

125

-

1

PT Bank DBS Indonesia ("Bank DBS")

Rp

-

125

-

29

Others

Rp

-

19

-

43

US$

1

16

8

42

Sub-total

MYR

-

-

9

30

2,269

3,414

Total time deposits

12,948

13,744

Allowance for expected credit loss

(0)

-

Total

17,420

18,242

Interest rates per annum on time deposits are as follows:

September 30, 2020

December 31, 2019

Rupiah

3.25% - 8.25%

4.00% - 9.25%

Foreign currency

0.70% - 2.90%

0.50% - 3.30%

The related parties in which the Group places its funds are state-owned banks. The Group placed the majority of its cash and cash equivalents in these banks because they have the most extensive branch networks in Indonesia and are considered to be financially sound banks, as they are owned by the State.

51

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

4. OTHER CURRENT FINANCIAL ASSETS

September 30, 2020

December 31, 2019

Balance

Balance

Foreign currency

Rupiah

Foreign currency

Rupiah

Time deposits

Currency

(in millions)

equivalent

(in millions)

equivalent

Related parties

BRI

Rp

-

50

-

-

BNI

Rp

-

20

-

-

Bank Mandiri

Rp

-

10

-

-

Third parties

SCB

US$

-

-

8

111

Others

Rp

-

18

-

18

Total time deposits

US$

5

76

6

71

174

200

Mutual funds

Related parties

PT Bahana TCW Investment Management

("Bahana TCM")

Rp

-

74

-

71

Total mutual funds

74

71

Escrow accounts

Rp

-

8

-

142

US$

1

21

1

15

MYR

-

-

6

19

Others

Rp

-

106

-

102

Allowance for expected credit loss

MYR

-

-

2

5

(0)

-

Total

383

554

The time deposits have maturities of more than three months but not more than one year, with interest rates as follows:

September 30, 2020

December 31, 2019

Rupiah

4.15% - 6.50%

6.50%

Foreign currency

0.15% - 1.08%

1.20% - 2.51%

5. TRADE RECEIVABLES

Trade receivables arise from services provided to both retail and non-retail customers, with details as follows:

a. By debtor

(i)

Related parties

September 30, 2020

December 31, 2019

State-owned enterprises

1,297

1,604

Indonusa

537

494

Indosat

191

150

Others

391

459

Total

2,416

2,707

Provision for impairment of receivables

(1,265)

(915)

Net

1,151

1,792

(ii)

Third parties

September 30, 2020

December 31, 2019

Individual and business subscribers

15,600

13,710

Overseas international carriers

2,377

1,583

Total

17,977

15,293

Provision for impairment of receivables

(6,407)

(5,288)

Net

11,570

10,005

52

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

5. TRADE RECEIVABLES (continued)

  1. By age
    1. Related parties

September 30, 2020

December 31, 2019

Up to 3 months

1,493

1,563

3 to 6 months

278

237

More than 6 months

645

907

Total

2,416

2,707

Provision for impairment of receivables

(1,265)

(915)

Net

1,151

1,792

(ii)

Third parties

September 30, 2020

December 31, 2019

Up to 3 months

10,489

9,270

3 to 6 months

1,390

1,077

More than 6 months

6,098

4,946

Total

17,977

15,293

Provision for impairment of receivables

(6,407)

(5,288)

Net

11,570

10,005

(iii)

Aging of total trade receivables

September 30, 2020

December 31, 2019

Allowance for

Expected

Provision for

Gross

expected

credit

Gross

impairment of

credit losses

loss rate

receivables

Not past due

9,585

562

5.9%

8,250

395

Past due up to 3 months

2,397

335

14.0%

2,583

513

Past due more than 3 to 6 months

1,668

717

43.0%

1,314

458

Past due more than 6 months

6,743

6,058

89.8%

5,853

4,837

Total

20,393

7,672

18,000

6,203

The Group has made provision for impairment of trade receivables based on the collective assessment of historical impairment rates and individual assessment of its customers' credit history. The Group does not apply a distinction between related party and third party receivables in assessing amounts past due. As of September 30, 2020 and December 31, 2019, the carrying amounts of trade receivables of the Group considered past due but not impaired amounted to Rp3,698 billion and Rp3,942 billion, respectively. Management believes that receivables past due but not impaired, along with trade receivables that are neither past due nor impaired, are due from customers with good credit history and are expected to be recoverable.

53

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

5. TRADE RECEIVABLES (continued)

c. By currency

(i)

Related parties

September 30, 2020

December 31, 2019

Rupiah

2,400

2,705

U.S. dollar

16

2

Others

-

0

Total

2,416

2,707

Provision for impairment of receivables

(1,265)

(915)

Net

1,151

1,792

(ii)

Third parties

September 30, 2020

December 31, 2019

Rupiah

14,675

12,883

U.S. dollar

3,175

2,298

Australian dollar

6

12

Others

121

100

Total

17,977

15,293

Provision for impairment of receivables

(6,407)

(5,288)

Net

11,570

10,005

d. Movements in the provision for impairment of receivables

September 30, 2020

December 31, 2019

Beginning balance

6,203

5,029

Adjustment on initial application of PSAK 71

225

-

Provision recognized during the period

1,244

2,283

Receivables written off

-

(1,109)

Ending balance

7,672

6,203

The receivables written off relate to both related party and third party trade receivables.

Management believes that the provision for impairment of trade receivables is adequate to cover losses on uncollectible trade receivables.

As of September 30 ,2020, certain trade receivables of the subsidiaries amounting to Rp6,149 billion have been pledged as collateral under lending agreements (Notes 18 and 19c).

6. CONTRACT ASSETS

Contract assets

September 30, 2020

1,265

Provision for expected credit losses

(148)

Net

1,117

Short term portion

(822)

Long term portion

295

54

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

7. INVENTORIES

September 30, 2020

December 31, 2019

Components

683

351

SIM cards and blank prepaid vouchers

242

154

Others

162

172

Total

1,087

677

Provision for obsolescence

Components

(30)

(62)

SIM cards and blank prepaid vouchers

(28)

(28)

Others

(3)

(2)

Total

(61)

(92)

Net

1,026

585

Movements in the provision for obsolescence are as follows:

September 30, 2020

December 31, 2019

Beginning balance

92

67

Provision recognized during the year

-

25

Inventory written off

(31)

-

Ending balance

61

92

Management believes that the provision is adequate to cover losses from decline in inventory value due to obsolescence.

The inventories recognized as expense and included in operations, maintenance and telecommunication service expenses as of September 30, 2020 and 2019 amounted to Rp358 billion and Rp1,493 billion, respectively (Note 26).

Certain inventories of the subsidiaries amounting to Rp343 billion have been pledged as collateral under lending agreements (Notes 19c).

As of September 30, 2020 and December 31, 2019, modules (part of property and equipment) and components held by the Group with book value amounting to Rp108 billion and Rp112 billion, respectively, have been insured against fire, theft, and other specific risks. Total sum insured as of September 30, 2020 and December 31, 2019 amounted to Rp155 billion, respectively.

Management believes that the insurance coverage is adequate to cover potential losses of inventories arising from the insured risks.

8. OTHER CURRENT ASSETS

The breakdown of other current assets is as follows:

September 30, 2020

December 31, 2020

Prepaid annual frequency license (Note 36c.i)

1,832

3,879

Advances

929

670

Prepaid salaries

354

189

Prepaid rental

167

1,403

Others

278

511

Total

3,560

6,652

55

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

9. CONTRACT COST

Movement of contract costs for the nine months period ended September 30, 2020 is follow:

September 30, 2020

At January 1, 2020

Cost to obtain

Cost to fulfill

Total

696

489

1,185

Amortisation during the year

(103)

(354)

(457)

Addition current year

526

499

1,025

At September 30, 2020

1,119

634

1,753

Short term portion

(172)

(269)

(441)

Long term portion

947

365

1,312

10. LONG-TERM INVESTMENTS

The Group has investments in several entities as follows:

September 30, 2020

Adjustment

Percentage

Beginning

on initial

Share of

Changes of net

Share of

Share of other

Ending

of

application

additions

net profit

comprehensive

Long-term

ownership

balance

of PSAK 71

(deductions)

fair value

(loss)

Dividend

income

Impairment

balance

investments

in associated

companies:

Tiphonea

24.00

526

-

-

-

(6)

-

-

(308)

212

Finaryab

26.58

267

-

-

(135)

-

-

-

132

Indonusac

20.00

210

-

-

-

-

-

-

-

210

Jalind

33.00

77

-

-

-

11

(5)

-

-

83

Othersi

6.32-51.00

130

-

-

-

(6)

-

-

-

124

Sub-total

1,210

-

-

-

(136)

(5)

-

(308)

761

Other long-term

investments

734

244

334

(21)

-

-

-

-

1,291

Total long-term

investments

1,944

244

334

(21 )

(136 )

(5 )

-

(308)

2,052

Summarized financial information of the Group's investments accounted under the equity method for period September 30, 2020:

Statements of financial position

Tiphone*

Finarya

Indonusa*

Jalin

Others

Current assets

8,165

2,141

495

159

1,045

Non-current assets

778

120

253

216

4,324

Current liabilities

(3,824)

(1,789)

(534)

(84)

(1,573)

Non-current liabilities

(741)

(3)

(278)

(39)

(5,337)

Equity (deficit)

4,378

469

(64)

252

(1,541)

Statements of profit or loss and other

comprehensive income

Revenues

28,442

21

794

194

1,045

Operating expenses

(27,621)

(505)

(738)

(145)

(1,015)

Other income (expenses) including

finance costs - net

(321)

5

1

(3)

(219)

Profit (loss) before tax

500

(479)

57

46

(189)

Income tax benefit (expense)

(138)

(8)

(10)

(11)

(5)

Profit (loss) for the year

362

(487)

47

35

(194)

Other comprehensive income (loss)

77

-

(1)

-

-

Total comprehensive income (loss)

for the period

439

(487)

46

35

(194)

* Based on financial information as of December 31,2019 and in the period ended the same year.

56

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

10. LONG-TERM INVESTMENTS (continued)

December 31, 2019

Share of

Share of other

Percentage of

Beginning

Additions

net profit

comprehensive

Ending

Long-term investments

ownership

balance

(deduction)

(loss)

Dividend

income

Impairment

balance

in associated

companies:

Tiphonea

24.00

1,602

-

88

(11)

19

(1,172)

526

Finaryab

26.58

-

484

(217)

-

-

-

267

Indonusac

20.00

210

-

-

-

-

-

210

Jalind

33.00

-

70

7

-

(0)

-

77

Cellume

30.40

79

-

(8)

-

-

-

71

ILCSf

49.00

44

-

(13)

-

0

-

31

GSNg

45.00

14

-

(1)

-

-

-

13

Teltraneth

51.00

-

34

(24)

-

1

-

11

Othersi

6.32-32.00

4

(2)

2

-

-

-

4

Sub-total

1,953

586

(166)

(11)

20

(1,172)

1,210

Other long-term

investments

519

215

-

-

-

-

734

Total long-term

investments

2,472

801

(166)

(11)

20

(1,172)

1,944

Summarized financial information of the Group's investments accounted under the equity method for year 2019:

Statements of financial position

Tiphone

Finarya

Indonusa

Jalin

Cellum

ILCS

GSN

Teltranet

Others

Current assets

8,165

2,382

495

100

14

119

17

291

615

Non-current assets

778

132

253

222

17

41

169

66

4,033

Current liabilities

(3,824)

(1,533)

(534)

(78)

(10)

(95)

(2)

(356)

(1,089)

Non-current liabilities

(741)

(3)

(278)

(10)

(27)

(2)

(155)

(58)

(5,101)

Equity (deficit)

4,378

978

(64)

234

(6)

63

29

(57)

(1,542)

Statements of profit or loss and other

comprehensive income

Revenues

28,442

38

794

205

13

206

7

195

784

Operating expenses

(27,621)

(877)

(738)

(148)

(40)

(212)

(9)

(242)

(800)

Other income (expenses) including

finance costs - net

(321)

17

1

2

-

(16)

(0)

(15)

(128)

Profit (loss) before tax

500

(822)

57

59

(27)

(22)

(2)

(62)

(144)

Income tax benefit (expense)

(138)

1

(10)

(17)

-

(4)

(0)

(43)

(1)

Profit (loss) for the period

362

(821)

47

42

(27)

(26)

(2)

(105)

(145)

Other comprehensive income (loss)

77

-

(1)

(0)

-

0

-)

2

-

Total comprehensive income (loss)

for the period

439

(821)

46

42

(27)

(26)

(2)

(103)

(145)

57

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

10. LONG-TERM INVESTMENTS (continued)

  • Tiphone was established on June 25, 2008 as PT Tiphone Mobile Indonesia Tbk. Tiphone is engaged in the telecommunication equipment business, such as celullar phone including spare parts, accessories, pulse reload vouchers, repair service, and content provider through its subsidiaries. On September 18, 2014, the Company through PINS acquired 25% ownership in Tiphone for Rp1,395 billion.
    As of September 30,2020 and December 31, 2019, the fair value of the investment amounted to Rp212 billion and Rp526 billion, respectively. The fair value was calculated by multiplying the number of shares by the published price quotation as of September 30, 2020 and December 31, 2019 amounting to Rp121 and Rp300 per share, respectively.
    Reconciliation of financial information to the carrying amount of long-term investment in Tiphone as of December 31, 2019 is as follows:

Assets

December 31, 2019

8,943

Liabilities

(4,565)

Net Assets

4,378

Group's proportionated share of net assets

(24.00% in 2019)

1,051

Goodwill

647

Impairment

(1,172)

Carrying amount of long-term invesment

526

  • On January 21, 2019, Telkomsel established a subsidiary of PT Fintek Karya Nusantara ("Finarya") with an initial investment amounted to Rp25 billion and on February 22, 2019 Telkomsel transferred its assets amounted to Rp150 billion. For this transaction, Telkomsel obtained 2,499 and 14,974 shares, respectively (equal to 100% ownership). Telkomsel with PT Mandiri Capital Indonesia, PT BRI Ventura Indonesia, PT BNI Sekuritas, PT Jasamarga Tollroad Operator, PT Dana Tabungan dan Asuransi Pegawai Negeri (Persero), PT Pertamina Retail, PT Kereta Commuter Indonesia ("KCI"), PT Asuransi Jiwasraya (Persero), and PT Danareksa Capital, entered in to shareholder agreement on July 31, 2019, October 31, 2019, and

December 31, 2019 relating to the increasing issued and paid up capital made by each shareholder. On December 31, 2019, Telkomsel owned 48,530 shares or equivalent to 26.58% ownership.

c Indonusa had been a subsidiary of the Company until 2013 when the Company disposed 80% of its interest in Indonusa. On May 14, 2014, based on the Circular Resolution of the Stockholders of Indonusa as covered by notarial deed No. 57 dated April 23, 2014 of FX Budi Santoso Isbandi, S.H., which was approved by the MoLHR in its Letter No. AHU-02078.40.20.2014 dated April 29, 2014, Indonusa's stockholders approved an increase in its issued and fully paid capital by Rp80 billion. The Company waived its right to own the new shares issued and transferred it to Metra, as the result, Metra's ownership in Indonusa increased to 4.33% and the Company's ownership become 15.67%.

  • Jalin was previously a subsidiary. On June 19, 2019 the company sold 67% of its shares to PT Danareksa (Persero)

("Danareksa") amounted to Rp395 billion.

  • Investment in Cellum is accounted for under the equity method, which covered by a conditional shares subsciption agreement between Metranet and Cellum in January 30, 2018. Cellum is a company which engaged in mobile payment and commerce

services.

  • PT Integrasi Logistik Cipta Solusi ("ILCS") is engaged in providing E-trade logistic services and other related services.
  • On August 31, 2017, NSI and third party established PT Graha Sakura Nusantara ("GSN") which engaged in real estate,

residential and apartment marketing business.

  • Investment in Teltranet is accounted for under the equity method, which covered by an agreement between Metra and Telstra Holding Singapore Pte. Ltd. dated August 29, 2014. Teltranet is engaged in communication system services.

Metra does not have control to determine the financial and operating policies of Teltranet.

  • The unrecognized share of losses in other investments cumulatively as of September 30, 2020 are Rp498 billion.

58

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

11. PROPERTY AND EQUIPMENT

Reclassifications/

September

At cost:

January 1, 2020

Acquisition

Additions

Deductions

Translations

30, 2020

Directly acquired assets

Land rights

1,644

-

9

-

2

1,655

Buildings

14,062

-

107

-

1,447

15,616

Leasehold improvements

1,549

-

3

(173)

15

1,394

Switching equipment

17,348

-

223

(1,919)

1,032

16,684

Telegraph, telex and data communication

equipment

2,258

-

-

-

(675)

1,583

Transmission installation and equipment

151,750

-

1,643

(2,298)

5,429

156,524

Satellite, earth station and equipment

12,344

-

69

(1)

145

12,557

Cable network

54,357

-

3,263

(56)

344

57,908

Power supply

20,113

-

167

(208)

656

20,728

Data processing equipment

16,409

-

148

(323)

1,666

17,900

Other telecommunication peripherals

5,340

-

1,173

-

16

6,529

Office equipment

2,361

-

104

(418)

58

2,105

Vehicles

568

-

48

(11)

36

641

Other equipment

123

-

18

-

(54)

87

Property under construction

2,619

-

10,947

-

(9,430)

4,136

Asset under finance lease

Transmission installation and equipment

5,500

-

-

-

(5,500)

-

Data processing equipment

1

-

-

-

(1)

-

Vehicles

503

-

-

-

(503)

-

Office equipment

42

-

-

-

(42)

-

CPE assets

22

-

-

-

(22)

-

Power supply

-

-

-

-

-

-

Revenue Sharing Agreement ("RSA")

assets

89

-

-

-

(89)

-

Total

309,002

-

17,922

(5,407)

(5,470)

316,047

Reclassifications/

September

Accumulated depreciation and

January 1, 2020

Acquisition

Additions

Deductions

Translations

30, 2020

impairment losses:

Directly acquired assets

Buildings

4,113

-

576

-

30

4,719

Leasehold improvements

1,091

-

180

(225)

-

1,046

Switching equipment

11,976

-

1,187

(1,917)

29

11,275

Telegraph, telex and data communication

equipment

1,580

-

-

-

-

1,580

Transmission installation and equipment

79,993

-

8,475

(2,265)

272

86,475

Satellite, earth station and equipment

5,809

-

655

(1)

8

6,471

Cable network

14,171

-

1,844

(56)

64

16,023

Power supply

13,596

-

1,117

(201)

50

14,562

Data processing equipment

11,977

-

1,146

(318)

(1)

12,804

Other telecommunication peripherals

1,766

-

799

-

(1)

2,564

Office equipment

1,678

-

235

(401)

31

1,543

Vehicles

210

-

59

(5)

14

278

Other equipment

66

-

1

-

(1)

66

Asset under finance lease

Transmission installation and equipment

3,734

-

-

-

(3,734)

-

Data processing equipment

1

-

-

-

(1)

-

Vehicles

115

-

-

-

(115)

-

Office equipment

44

-

-

-

(44)

-

CPE assets

20

-

-

-

(20)

-

Power supply

-

-

-

-

-

-

RSA assets

89

-

-

-

(89)

-

Total

152,029

-

16,274

(5,389)

(3,508)

159,406

Net book value

156,973

156,641

59

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

11. PROPERTY AND EQUIPMENT (continued)

January 1,

Reclassifications/

December 31,

At cost:

2019

Acquisition

Additions

Deductions

translations

2019

Directly acquired assets

Land rights

1,626

6

16

-

(4)

1,644

Buildings

11,833

12

779

(4)

1,442

14,062

Leasehold improvements

1,375

-

37

(58)

195

1,549

Switching equipment

15,921

-

1,228

(61)

890

17,348

Telegraph, telex, and data communication

equipment

1,586

-

675

-

(3)

2,258

Transmission installation and equipment

141,408

686

6,768

(6,240)

9,128

151,750

Satellite, earth station, and equipment

11,972

-

108

(11)

275

12,344

Cable network

45,451

-

8,197

(113)

822

54,357

Power supply

17,864

-

793

(253)

1,709

20,113

Data processing equipment

14,265

10

709

(107)

1,532

16,409

Other telecommunication peripherals

3,423

-

1,904

-

13

5,340

Office equipment

2,142

7

208

(101)

105

2,361

Vehicles

641

-

99

(167)

(5)

568

Other equipment

94

-

57

-

(28)

123

Property under construction

4,876

81

14,923

(20)

(17,241)

2,619

Asset under finance lease

Transmission installation and equipment

5,603

-

-

(102)

(1)

5,500

Data processing equipment

1

-

-

-

-

1

Vehicles

578

1

54

(80)

(50)

503

Office equipment

16

-

30

(4)

-

42

CPE assets

22

-

-

-

-

22

Power supply

125

-

-

-

(125)

-

RSA assets

252

-

-

-

(163)

89

Total

280,444

803

36,585

(7,321)

(1,509)

309,002

January 1,

Reclassifications/

December 31,

Accumulated depreciation and

2019

Acquisition

Additions

Deductions

translations

2019

impairment losses:

Directly acquired assets

Buildings

3,405

-

726

(4)

(14)

4,113

Leasehold improvements

949

-

198

(56)

-

1,091

Switching equipment

10,550

-

1,488

(45)

(17)

11,976

Telegraph, telex, and data communication

equipment

1,320

-

260

-

-

1,580

Transmission installation and equipment

74,247

-

11,059

(5,260)

(53)

79,993

Satellite, earth station, and equipment

5,005

-

818

(10)

(4)

5,809

Cable network

12,185

-

2,349

(102)

(261)

14,171

Power supply

12,316

-

1,454

(239)

65

13,596

Data processing equipment

10,747

-

1,304

(61)

(13)

11,977

Other telecommunication peripherals

1,029

-

737

-

-

1,766

Office equipment

1,312

-

383

(55)

38

1,678

Vehicles

281

-

72

(137)

(6)

210

Other equipment

75

-

1

-

(10)

66

Asset under finance lease

Transmission installation and equipment

3,241

-

587

(94)

-

3,734

Data processing equipment

1

-

-

-

-

1

Vehicles

126

-

72

(58)

(25)

115

Office equipment

70

-

3

(3)

(26)

44

CPE assets

20

-

-

-

-

20

Power supply

73

-

-

-

(73)

-

RSA assets

244

-

-

-

(155)

89

Total

137,196

-

21,511

(6,124)

(554)

152,029

Net book value

143,248

156,973

a. Gain on sale of property and equipment

2020

2019

Proceeds from sale of property and equipment

141

1,261

Net book value

(6)

(664)

Gain on disposal or sale of property and equipment

135

597

60

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

11. PROPERTY AND EQUIPMENT (continued) b. Others

  1. As of December 31, 2019, the CGUs that independently generate cash inflows are fixed wireline, cellular, and others. Management believes that there is no indication of impairment in the assets of such CGUs as of December 31, 2019.
  2. Interest capitalized to property under construction amounted to Rp89 billion and Rp87 billion for the nine months period ended September 30, 2020 and 2019, respectively. The capitalization rate used to determine the amount of borrowing costs eligible for capitalization ranged from 2.38% to 11.00% and 3.79% to 11.00% for the nine months period ended September 30, 2020 and 2019, respectively.
  3. No foreign exchange loss was capitalized as part of property under construction for the nine months period ended September 30,2020 and for the year ended December 31,2019.
  4. On September 30, 2020 and 2019, the Group obtained proceeds from the insurance claim on lost and broken property and equipment, with a total value of Rp218 billion and Rp95 billion, respectively, and were recorded as part of "Other Income (expenses) - net" in the consolidated statements of profit or loss and other comprehensive income. On September 30, 2020 and 2019, the net carrying value of those assets of Rp36 billion and Rp15 billion, respectively, were charged to the consolidated statements of profit or loss and other comprehensive income.
  5. In 2018, the estimated useful lives of radio software license and data processing equipment were changed from 7 to 10 years and from 3 to 5 years, respectively. The impact of reduction in the depreciation expense for the nine months ended September 30, 2020 amounting to Rp233 billion.
    The change in useful lives will increase/(decrease) profit before income tax in future years as follows:

Years

Increase (Decrease)

2021

18

2022

(106)

(vi) In

2019,

Telkomsel's certain

equipment

units with

net carrying amount

of

Rp803 billion were exchanged with equipment from Ericsson AB, PT Ericsson Indonesia,

PT

Huawei

Tech Investment,

PT Nokia

Solutions and

Network Indonesia,

and

PT ZTE Indonesia. As of September 30, 2020, Telkomsel's equipment units with net carrying amount of Rp39 billion are going to be exchanged and, therefore, these equipment were reclassified as "Assets held for sale" in the consolidated statements of financial position.

  1. The Group owns several pieces of land located throughout Indonesia with Building Use Rights ("Hak Guna Bangunan" or "HGB") for a period of 10-50 years which will expire between 2020 and 2069. Management believes that there will be no issue in obtaining the extension of the land rights when they expire.
  2. As of September 30, 2020, the Group's property and equipment excluding land rights, with net carrying amount of Rp146,456 billion were insured against fire, theft, earthquake and other specified risks, including business interruption, under blanket policies totalling Rp24,650 billion, US$38 million, HK$8 million, SG$269 million, AU$4 million, and MYR44 million and first loss basis amounted to Rp2,750 billion. Management believes that the insurance coverage is adequate to cover potential losses from the insured risks.

61

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

  1. PROPERTY AND EQUIPMENT (continued) b. Others (continued)
    1. As of September 30, 2020, the percentage of completion of property under construction was around 41.80% of the total contract value, with estimated dates of completion until December 2021. The balance of property under construction mainly consists of buildings, transmission installation and equipment, cable network and power supply. Management believes that there is no impediment to the completion of the construction in progress.
    2. All assets owned by the Company have been pledged as collateral for bonds (Notes 19b.i). Certain property and equipment of the Company's subsidiaries with gross carrying value amounting to Rp9,016 billion have been pledged as collateral under lending agreements (Notes 18, 19c, and 19d).
    3. As of September 30, 2020, the cost of fully depreciated property and equipment of the Group that are still used in operations amounted to Rp62,626 billion. The Group is currently performing modernization of network assets to replace the fully depreciated property and equipment.
    4. In 2019, the total fair values of land rights and buildings of the Group, which are determined based on the sale value of the tax object (Nilai Jual Objek Pajak or "NJOP") of the related land rights and buildings, amounted to Rp36,842 billion.
  2. RIGHT OF USE ASSETS
    The Group leases several assets including land rights, building, transmission installation and equipments, power supply, vehicles, and other equipments used in its operations, which generally have lease term between 2 and 15 years.
    The Group also has certain leases with lease terms of twelve months or less and low-value leases. The Group applies the 'short-term lease' and 'lease of low-value assets' recognition exemptions for these leases. There are no lease contracts with variable lease payments. Short-term and low-value assets lease expense of Rp2.065 billion were incurred for the period ended September 30, 2020.
    The carrying amounts of right of use assets recognized and the movement during the period:

December 31,

Effect

January 1,

Reclassification/ September 30,

At cost:

2019

Adoption PSAK 73

2020

Additions

Deduction

translation

2020

Land rights

-

3,772

3,772

745

-

4

4,521

Buildings

-

594

594

234

(209)

29

648

Transmission installation

and equipment

-

14,964

14,964

74

(571)

(72)

14,395

Power supply

-

514

514

-

-

-

514

Vehicles

-

513

513

8

(2)

-

519

Others

-

184

184

-

-

-

184

Total

-

20,541

20,541

1,061

(782)

(39)

20,781

Accumulated

amortization:

Land rights

-

-

-

(581)

-

-

(581)

Buildings

-

-

-

(122)

23

(6)

(105)

Transmission installation

and equipment

-

-

-

(2,473)

324

64

(2,085)

Power supply

-

-

-

(122)

-

-

(122)

Vehicles

-

-

-

(83)

-

-

(83)

Others

-

-

-

(45)

-

-

(45)

Total

-

-

-

(3,426)

347

58

(3,021)

Net book value

-

17,760

62

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

12. RIGHT OF USE ASSETS (continued)

Maturity analysis of lease payments are as follows:

Years

September 30, 2020

December 31, 2019

2020

6,175

936

2021

776

785

2022

2.948

607

2023

2,240

255

2024

1,394

85

Thereafter

2,186

45

Total lease payments

15,719

2,713

Interest

(2,161)

(373)

Net present value of lease payments

13,558

2,340

Adjustment on initial application of PSAK 73

-

14,425

Total lease liability

13,558

16,765

Current maturities (Note 18b)

(5,397)

(3,185)

Long-term portion (Note 19)

8,161

13,580

Reconciliation of operating lease commitment and lease liabilities are as follows:

Operating lease commitments

18,367

Less:

Commitments relating to short-term leases

(70)

Commitments relating to leases of low-value assets

(58)

Operating lease commitments as at January 1, 2020

18,239

Weighted average incremental borrowing rate as at January 1, 2020

7.41%

Discounted operating lease commitments as at January 1, 2020

14,355

Add:

Adjustments as a result of a different treatment of extension and termination option

70

Lease liabilities as at January 1, 2020

14,425

13. OTHER NON-CURRENT ASSETS

The breakdown of other non-current assets is as follows:

Prepaid annual frequency license

September 30, 2020

December 31, 2019

net of current portion (Note 8)

1,300

1,488

Claim for tax refund (Note 28b)

777

3,666

Prepaid income taxes (Note 28a)

769

678

Advances for purchases of property and equipment

586

481

Deferred charges

555

570

Prepaid rent

267

3,170

Security deposit

161

210

Convertible bonds

151

319

Others

239

643

Total

4,805

11,225

Prepaid rental covers rent of leased line, telecommunication equipment, land and building under lease agreements of the Group with remaining rental periods over 1 year.

As of September 30, 2020 and 2019, deferred charges represent deferred Indefeasible Right of Use ("IRU") Agreement charges. Total amortization of deferred charges for the nine months period ended September 30, 2020 and 2019 amounted to Rp47 billion and Rp51 billion, respectively.

63

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

14. INTANGIBLE ASSETS

The details of intangible assets are as follows:

Other intangible

Gross carrying amount:

Goodwill

Software

License

assets

Total

Balance, January 1, 2020

1,432

12,480

96

1,571

15,579

Additions

-

1,634

6

1

1,641

Deductions

-

(6)

-

-

(6)

Reclassifications/translations

4

16

(12)

(86)

(78)

Balance, September 30, 2020

1,436

14,124

90

1,486

17,136

Accumulated amortization:

Balance, January 1, 2020

(29)

(8,400)

(93)

(611)

(9,133)

Amortization

(32)

(1,199)

(6)

(90)

(1,327)

Deductions

-

6

-

-

6

Reclassifications/translations

-

-

8

12

20

Balance, September 30, 2020

(61)

(9,593)

(91)

(689)

(10,434)

Net book value

1,375

4,531

(1)

797

6,702

Other intangible

Gross carrying amount:

Goodwill

Software

License

assets

Total

Balance, January 1, 2019

1,066

10,680

94

687

12,527

Additions

-

1,942

4

511

2,457

Acquisition

467

-

-

379

846

Deductions

(104)

(166)

(12)

(14)

(296)

Reclassifications/translations

3

24

10

8

45

Balance, December 31, 2019

1,432

12,480

96

1,571

15,579

Accumulated amortization and impairment

losses:

Balance, January 1, 2019

(29)

(6,896)

(81)

(489)

(7,495)

Amortization

-

(1,165)

(357)

(145)

(1,667)

Deductions

-

71

2

14

87

Reclassifications/translations

-

(410)

343

9

(58)

Balance, December 31, 2019

(29)

(8,400)

(93)

(611)

(9,133)

Net book value

1,403

4,080

3

960

6,446

  1. Goodwill resulted from the acquisition of Sigma (2008), Admedika (2010), data center PT Bina Data Mandiri ("BDM") (2012), Contact Centres Australia Pty. Ltd. (2014), PT Media Nusantara Data Global ("MNDG") (2015), Melon and PT Griya Silkindo Drajatmoerni ("GSDm") (2016), TSGN and Nutech (2017), SSI, CIP, and Telin Malaysia (2018), and PST (2019) (Note 1e).
  2. The amortization is presented as part of "Depreciation and Amortization" in the consolidated statements of profit or loss and other comprehensive income. The remaining amortization periods of software range from 1-6 years.
  3. As of September 30, 2020 the cost of fully amortized intangible assets that are still used in operations amounted to Rp6,698 billion.

64

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

15. TRADE PAYABLES

The breakdown of trade payables is as follows:

September 30, 2020

December 31, 2019

Related parties

Purchases of equipments, materials, and services

544

683

Payables to other telecommunication providers

274

136

Sub-total

818

819

Third parties

Purchases of equipments, materials and services

10,985

10,634

Radio frequency usage charges, concession fees,

and Universal Service Obligation ("USO") charges

1,421

1,374

Payables to other telecommunication providers

1,360

1,070

Sub-total

13,766

13,078

Total

14,584

13,897

Trade payables by currency are as follows:

September 30, 2020

December 31, 2019

Rupiah

11,812

12,027

U.S. Dollar

2,724

1,823

Others

48

47

Total

14,584

13,897

Refer to Note 33 for details of related parties transactions.

16. ACCRUED EXPENSES

The breakdown of accrued expenses is as follows:

September 30, 2020 December 31, 2019

Operation, maintenance, and telecommunication services

9,212

General, administrative, and marketing expenses

2,252

Salaries and benefits

2,084

Interest and bank charges

136

Total

13,684

17. CONTRACT LIABILITIES a. Current portion

September 30, 2020

8,450

2,658

2,412

216

13,736

December 31, 2019

Prepaid pulse reload vouchers Material rights for contract renewal Others

Total

b. Non-current portion

5,256

104

1,441

6,801

September 30, 2020

5,212

76

1,447

6,735

December 31, 2019

Indefeasible Right of Use

302

Material rights for contract renewal

567

Others

156

Total

1,025

327

389

87

803

The balance of contract liabilities as of December 31, 2019 is presented as unearned income in the consolidated statements of financial position.

65

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

18. SHORT-TERM BANK LOANS AND CURRENT MATURITIES OF LONG-TERM BORROWINGS a. Short-termbank loans

September 30, 2020

December 31, 2019

Outstanding

Outstanding

Foreign

Foreign

currency

Rupiah

currency

Rupiah

Lenders

Currency

(in millions)

equivalent

(in millions)

equivalent

Related parties

Bank Mandiri

Rp

-

2,900

-

2,400

BNI

Rp

-

1,040

-

1,238

PT Bank BNI Syariah ("BNI Syariah")

Rp

-

-

-

17

Sub-total

3,940

3,655

Third parties

HSBC

Rp

-

2,206

-

1,754

US$

0

3

0

4

MUFG Bank, Ltd. ("MUFG Bank")

Rp

-

1,941

-

1,705

Bank DBS

Rp

-

652

-

722

US$

1

13

1

13

PT Bank UOB Indonesia ("UOB Indonesia")

Rp

-

250

-

500

UOB Singapore ("UOB Singapore")

US$

9

134

-

-

PT Bank BTPN ("BTPN") (previously

"Sumitomo")

Rp

-

125

-

-

SCB

Rp

-

100

-

150

Bank CIMB Niaga

Rp

-

78

-

78

PT Bank Central Asia Tbk. ("BCA")

Rp

-

73

-

124

Sub-total

5,575

5,050

Total

9,515

8,705

Other significant information relating to short-term bank loans as of September 30, 2020 is as follows:

Total facility

Interest rate per

Mandiri

Borrower

Currency

(in billions)

Maturity date

Interest rate

annum

Security**

2019 - 2020

The Company,

Rp

2,600

November 21, 2020 -

Monthly,

1 bulan

None

Finnet

April 28, 2021

Quarterly

JIBOR + 1.50%

3 bulan

BNI

JIBOR + 0.60%

2014 - 2017

Sigmaa, GSD

Rp

325

November 8, 2020 -

Monthly

9.00%

Trade

January 9, 2021

receivables and

property and

equipment

2018 - 2019

Telkom Infratel,

Rp

2,960

October 2, 2020 -

Monthly

1 month

Trade

Infomediab,

June 6, 2021

JIBOR + 2.20% -

receivables

Sigmah,

2.50%

HSBC

Metranet, GTS

2018

Sigmac,h

Rp

600

July 31, 2021

Monthly

6.74%

Trade

receivables

2018

Sigmac,h

US$

0.004

July 31, 2021

Monthly

4.12%

Trade

receivables

2018 - 2019

The Company,

Rp

3,337

April 8, 2021 -

Monthly,

1 month

Trade

Sigma, Melon,

August 30, 2021

Quarterly

JIBOR + 0.60% -

receivables

Metra,

0.70%

MD Media, PINS

3 month

JIBOR + 1.00%

66

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

18. SHORT-TERM BANK LOANS AND CURRENT MATURITIES OF LONG-TERM BORROWINGS (continued)

  1. Short-termbank loans (continued)

Other significant information relating to short-term bank loans as of September 30, 2020 is as follows:

Total facility

Interest rate per

Mandiri

Borrower

Currency

(in billions)

Maturity date

Interest rate

annum

Security**

MUFG Bank

2018 - 2019

The Company,

Rp

1,860

March 27, 2021 -

Monthly

1 month

None

Infomedia,

August 23, 2021

JIBOR + 0.70%

Metra, GSD,

Bank DBS

Telkom Infratel

2016

Nutech

Rp

17

October 18, 2020

Monthly

10.50%

None

2018

Telkom Infratel,

Rp

600

February 26, 2021 -

Monthly

1 month

None

Infomedia

July 31, 2021

JIBOR + 0.70%

2016

Sigmad,e

US$

0.02

July 31, 2021

Semi-annually

3.25% (US$).

Trade

UOB Indonesia

10.75% (Rp)

receivables

2016

Finnetf

Rp

500

December 20, 2020

Monthly

1 month

None

UOB Singapore

JIBOR + 2.00%

2016

Telin

US$

0.049

December 18, 2020

Monthly

1 month

None

Bank BTPN

JIBOR + 1.25%

2013

PINS

Rp

250

February 13, 2021

Quarterly

3 month

None

SCB

JIBOR + 2.25%

2015

GSDg

Rp

150

October 16, 2020

Monthly

Cos of fund + 2.5%

None

Bank CIMB Niaga

2013

GSDh

Rp

85

January 1, 2021

Monthly

10.90% - 11.50%

Trade

receivables and

property and

BCA

equipment

2019

Telkom Infratel

Rp

600

November 22, 2020

Monthly

1 month

Trade

JIBOR + 1.75%

receivables

  • In original currency

** Refer to Note 5 and Note 11 for details of trade receivables and property and equipment pledged as collateral.

  • Based on the latest amendment on April 23, 2019.
  • Based on the latest amendment on March 28, 2018 and July 6, 2018.
  • Based on the latest amendment on July 16, 2018.
  • Based on the latest amendment on December 5, 2018.
  • Facility in U.S. Dollar. Withdrawal can be executed in U.S. Dollar and Rupiah.
  • Based on the latest amendment on June 5, 2018.
  • Based on the latest amendment on January 18, 2019.
  • Unsettled loan will be automatically extended.

As stated in the agreements, the Group is required to comply with all covenants or restrictions such as limitation that the Company must have a majority shareholding of at least 51% of the subsidiaries in the agreement and maintaining financial ratios. As of December 31, 2019, the Group has complied with all covenants or restrictions, except for certain loans. As of December 31, 2019, the Group obtained waiver from lenders to not demand the loan payment as consequence of the breach of covenants, except for Telkom Infratel, the waiver from BCA was received on January 27, 2020.

On November 21, 2019, the Company, Dayamitra, and GSD entered credit agreements amendments with Bank Mandiri amounting to Rp2,400 billion. As of September 30, 2020, all facilities had been used.

On February 20, 2020, the Company, Infomedia, and Telkom Infratel entered credit agreements changes with Bank DBS amounting to Rp600 billion. As of September 30, 2020, the unused facilities was amounting to Rp125 billion.

67

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

18. SHORT-TERM BANK LOANS AND CURRENT MATURITIES OF LONG-TERM BORROWINGS (continued)

  1. Short-termbank loans (continued)
    On March 27, 2020, the Company, Metra, Infomedia, and Telin entered credit agreements changes with MUFG Bank amounting to Rp600 billion. As of September 30, 2020, the unused facilities was amounting to Rp230 billion.
    On May 28, 2020, the Company, Metra, MD Media, and Metranet entered credit agreements changes with HSBC amounting to Rp1,000 billion. As of September 30, 2020, the unused facilities was amounting to Rp130 billion.
    On June 18, 2020, the Company, Infomedia, MD Media, and Telkom Infratel entered credit agreements changes with MUFG Bank amounting to Rp1,560 billion. As of September 30, 2020, the unused facilities was amounting to Rp900 billion.
    On August 24, 2020, the Company, Sigma, and Melon entered credit agreements changes with HSBC amounting to Rp700 billion. As of September 30, 2020, the unused facilities was amounting to Rp207 billion.
    On August 19, 2020, the Company and GSD entered credit agreements changes with MUFG Bank amounting to Rp900 billion. As of September 30, 2020, the unused facilities was amounting to Rp19 billion.
    The credit facilities were obtained by the Group for working capital purposes.

b. Current maturities of long-term borrowings

Notes

September 30, 2020

December 31, 2019

Two-step loans

19a

191

194

Bonds and notes

19b

478

2,491

Bank loans

19c

5,103

5,434

Other borrowings

19d

1,040

627

Obligation under finance lease

12

-

764

Lease liabilities

12

5,397

-

Total

12,209

9,510

68

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

19. LONG-TERM LOANS AND OTHER BORROWINGS

Notes

September 30, 2020

December 31, 2019

Two-step loans

19a

466

542

Bonds and notes

19b

6,991

7,467

Bank loans

19c

21,712

21,171

Other borrowings

19d

2,714

3,113

Obligation under finance leases

12

-

1,576

Lease liabilities

12

8,161

-

Total

40,044

33,869

Scheduled principal payments as of September 30, 2020 are as follows:

Year

Notes

Total

2021

2022

2023

2024

Thereafter

Two-step loans

19a

466

69

153

135

109

-

Bonds and notes

19b

6,991

-

2,199

-

-

4,792

Bank loans

19c

21,712

3,136

4,860

5,319

3,573

4,824

Other borrowings

19d

2,714

109

1,041

1,052

512

-

Lease liabilities

12

8,161

569

2,470

1,938

1,211

1,973

Total

40,044

3,883

10,723

8,444

5,405

11,589

  1. Two-steploans
    Two-step loans are unsecured loans obtained by the Government from overseas banks which are then re-loaned to the Company. Loans obtained up to July 1994 are payable in Rupiah based on the exchange rate at the date of drawdown. Loans obtained after July 1994 are payable in their original currencies and any resulting foreign exchange gain or loss is borne by the Company.

September 30, 2020

December 31, 2019

Outstanding

Outstanding

Foreign currency

Rupiah

Foreign currency

Rupiah

Lenders

Currency

(in millions)

equivalent

(in millions)

equivalent

Overseas banks

Yen

3,456

488

3,839

491

US$

4

63

9

120

Total

Rp

-

106

-

125

657

736

Current maturities (Note 18b)

(191)

(194)

Long-term portion

466

542

Principal payment

Interest rate per

Lenders

Currency

schedule

Interest payment period

annum

Overseas banks

Yen

Semi-annually

Semi-annually

2.95%

US$

Semi-annually

Semi-annually

3.85%

Rp

Semi-annually

Semi-annually

8.38%

The loans were intended for the development of telecommunications infrastructure and supporting telecommunications equipment. The loans will be settled semi-annually and due on various dates until 2025.

The Company had used all facilities under the two-step loans program since 2008 and the withdrawal period for the two-step loan has ended.

Under the loan covenants, the Company is required to maintain financial ratios as follows:

  1. Projected net revenue to projected debt service ratio should exceed 1.2:1 for the two-step loans originating from Asian Development Bank ("ADB").
  2. Internal financing (earnings before depreciation and finance costs) should exceed 20% compared to annual average capital expenditures for loans originating from the ADB.

As of September 30, 2020 , the Company has complied with the above-mentioned ratios.

69

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

19. LONG-TERM LOANS AND OTHER BORROWINGS (continued) b. Bonds and notes

September 30, 2020

December 31, 2019

Outstanding

Outstanding

Foreign currency

Rupiah

Foreign currency

Rupiah

Bonds and notes

Currency

(in millions)

equivalent

(in millions)

equivalent

Bonds

2010

Series B

Rp

-

-

-

1,995

2015

Series A

Rp

-

2,200

-

2,200

Series B

Rp

-

2,100

-

2,100

Series C

Rp

-

1,200

-

1,200

Series D

Rp

-

1,500

-

1,500

Medium Term Notes ("MTN")

MTN I Telkom 2018

Series A

Rp

-

-

-

-

Series B

Rp

-

-

-

200

Series C

Rp

-

296

-

296

MTN Syariah Ijarah I Telkom 2018

Series A

Rp

-

-

-

-

Series B

Rp

-

-

-

296

Series C

Rp

-

182

-

182

Total

7,478

9,969

Unamortized debt issuance cost

(9)

(11)

Total

7,469

9,958

Current maturities (Note 18b)

(478)

(2,491)

Long-term portion

6,991

7,467

i. Bonds

2010

Interest

Interest rate

Bonds

Principal

Issuer

Listed on

Issuance date

Maturity date

payment period

per annum

Series B

1,995

The Company

IDX

June 25, 2010

July 6, 2020

Quartely

10.20%

The bonds are not secured by specific security but by all of the Company's assets, movable or non-movable, either existing or in the future (Note 11b.x). The underwriters of the bonds are PT Bahana Securities ("Bahana"), PT Danareksa Sekuritas, and PT Mandiri Sekuritas and the trustee is Bank CIMB Niaga. Based on the General Meeting of Bondholders on September 26, 2018, the trustee was changed to BTN.

The Company received the proceeds from the issuance of bonds on July 6, 2010.

The funds received from the public offering of bonds net of issuance costs, were used to finance capital expenditures which consisted of wave broadband (bandwidth, softswitching, datacom, information technology, and others), infrastructure (backbone, metro network, regional metro junction, internet protocol, and satellite system) and to optimize legacy and supporting facilities (fixed wireline and wireless).

As of September 30, 2020, the rating of the bonds issued by PT Pemeringkat Efek Indonesia ("Pefindo") is idAAA (Triple A).

Based on the Indenture Trusts Agreement, the Company is required to comply with all covenants or restrictions, including maintaining financial ratios as follows:

  1. Debt to equity ratio should not exceed 2:1.
  2. EBITDA to interest ratio should not be less than 5:1.
  3. Debt service coverage is at least 125%.

As of September 30, 2020 the Company has complied with the above-mentioned ratios.

70

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

19. LONG-TERM LOANS AND OTHER BORROWINGS (continued) b. Bonds and notes (continued)

  1. Bonds (continued)
    2015

Issuance

Interest

Interest rate

Bonds

Principal

Issuer

Listed on

date

Maturity date

payment period

per annum

Series A

2,200

The Company

IDX

June 23, 2015

June 23, 2022

Quarterly

9.93%

Series B

2,100

The Company

IDX

June 23, 2015

June 23, 2025

Quarterly

10.25%

Series C

1,200

The Company

IDX

June 23, 2015

June 23, 2030

Quarterly

10.60%

Series D

1,500

The Company

IDX

June 23, 2015

June 23, 2045

Quarterly

11.00%

Total

7,000

The bonds are not secured by specific security but by all of the Company's assets, movable or non-movable, either existing or in the future (Note 11b.x). The underwriters of the bonds are Bahana, PT Danareksa Sekuritas, PT Mandiri Sekuritas, and PT Trimegah Sekuritas Indonesia, Tbk. and the trustee is Bank Permata.

The Company received the proceeds from the issuance of bonds on June 23, 2015.

The funds received from the public offering of bonds net of issuance costs, were used to finance capital expenditures which consisted of wave broadband, backbone, metro network, regional metro junction, information technology application and support, and merger and acquisition of some domestic and international entities.

As of September 30,2020, the rating of the bonds issued by Pefindo is idAAA (Triple A).

Based on the Indenture Trusts Agreement, the Company is required to comply with all covenants or restrictions, including maintaining financial ratios as follows:

  1. Debt to equity ratio should not exceed 2:1.
  2. EBITDA to interest ratio should not be less than 4:1.
  3. Debt service coverage is at least 125%.

As of September 30, 2020, the Company has complied with the above-mentioned ratios.

  1. MTN
    MTN I Telkom Year 2018

Interest

Issuance

Maturity

payment

Interest rate

Notes

Currency

Principal

date

date

period

per annum

Security

Series A

Rp

262

September 4, 2018

September 14, 2019

Quarterly

7.25%

All assets

Series B

Rp

200

September 4, 2018

September 4, 2020

Quarterly

8.00%

All assets

Series C

Rp

296

September 4, 2018

September 4, 2021

Quarterly

8.35%

All assets

758

Based on Agreement of Issuance and Appointment of Monitoring Agents of Medium Term Notes ("MTN") I Telkom Year 2018 dated August 31, 2018 as covered by notarial deed No. 24 of Fathiah Helmi, S.H., the Company issued MTN with the principal amount up to Rp758 billion in series.

Bahana, PT BNI Sekuritas, PT CGS-CIMB Sekuritas Indonesia, PT Danareksa Sekuritas, and PT Mandiri Sekuritas act as the Arranger, BTN as the Monitoring Agent and PT Kustodian Sentral Efek Indonesia ("KSEI") as the Payment Agent and the Custodian. The MTN are traded in private placement programs. The funds obtained from MTN are used for access network and backbone development.

As of September 30, 2020, the rating of the MTN issued by Pefindo is idAAA (Triple A).

71

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

19. LONG-TERM LOANS AND OTHER BORROWINGS (continued) b. Bonds and notes (continued)

  1. MTN (continued)

MTN I Telkom Year 2018 (continued)

Under to the agreement, the Company is required to comply with all covenants or restrictions including maintaining financial ratios as follows:

  1. Debt to equity ratio should not exceed 2:1.
  2. EBITDA to interest ratio should not be less than 4:1.
  3. Debt service coverage is at least 125%.

As of September 30,2020, the Company has complied with the above-mentioned ratios.

MTN Syariah Ijarah I Telkom Year 2018

Annual

Issuance

Maturity

Return

return

Notes

Currency

Principal

date

date

period

payment

Security

Series A

Rp

264

September 4, 2018

September 14, 2019

Quarterly

19

The Right to benefit of

ijarah objects

Series B

Rp

296

September 4, 2018

September 4, 2020

Quarterly

24

The Right to benefit of

ijarah objects

Series C

Rp

182

September 4, 2018

September 4, 2021

Quarterly

15

The Right to benefit of

ijarah objects

742

58

Based on Agreement of Issuance and Appointment of Monitoring Agents of MTN Syariah Ijarah Telkom Year 2018 dated August 31, 2018 as covered by notarial deed No. 26 of Fathiah Helmi, S.H., the Company issued MTN Syariah Ijarah with the principal amount up to Rp742 billion in series.

Bahana, PT BNI Sekuritas, PT CGS-CIMB Sekuritas Indonesia, PT Danareksa Sekuritas, and PT Mandiri Sekuritas act as the Arranger, BTN as the Monitoring Agent and KSEI as the Payment Agent and the Custodian. The MTN Syariah Ijarah are traded in private placement programs. The funds obtained from MTN Syariah Ijarah are used for investment projects. The object of MTN Syariah Ijarah transaction is telecommunication network which is located in the special region of Yogyakarta, its network telecommunication involves cable network, information technology equipments, and other production tools of telecommunication services.

As of September 30,2020 the rating of the MTN Syariah Ijarah issued by Pefindo is idAAA sy (Triple A Syariah).

Under to the agreement, the Company is required to comply with all covenants or restrictions including maintaining financial ratios as follows:

  1. Debt to equity ratio should not exceed 2:1.
  2. EBITDA to interest ratio should not be less than 4:1.
  3. Debt service coverage is at least 125%.

As of September 30, 2020, the Company has complied with the above-mentioned ratios.

72

These consolidated financial statements are originally issued in the Indonesian language.

PERUSAHAAN PERSEROAN (PERSERO)

PT TELEKOMUNIKASI INDONESIA Tbk. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Period Ended September 30, 2020 and 2019 (unaudited)

(Amounts in the tables expressed in billions of Indonesian Rupiah, unless otherwise stated)

19. LONG-TERM LOANS AND OTHER BORROWINGS (continued) c. Bank loans

September 30, 2020

December 31, 2019

Outstanding

Outstanding

Foreign

Foreign

currency

Rupiah

currency

Rupiah

Lenders

Currency

(in millions)

equivalent

(in millions)

equivalent

Related parties

BNI

Rp

-

8,643

-

5,898

Bank Mandiri

Rp

-

6,370

-

7,611

BRI

Rp

-

2,827

-

1,758

BNI Syariah

Rp

-

46

-

52

Sub-total

17,886

15,319

Third parties

BCA

Rp

-

2,941

-

1,665

MUFG Bank

Rp

-

2,363

-

2,981

US$

-

-

8

108

Bank Permata

Rp

-

757

-

-

Bank DBS

Rp

-

641

-

770

Syndication of banks

Rp

-

25

-

1,250

US$

30

453

37

514

UOB Singapore

US$

31

459

40

556

ANZ

Rp

-

396

-

440

Bank CIMB Niaga

Rp

-

343

-

439

Citibank

Rp

-

250

-

500

BTPN

Rp

-

199

-

537

PT Bank ICBC Indonesia ("ICBC")

Rp

-

125

-

159

Others

Rp

-

2

-

1,366

Sub-total

MYR

12

43

19

66

8,997

11,351

Total

26,883

26,670

Unamortized debt issuance cost

(68)

(65)

26,815

26,605