PT Ciputra Development Tbk And Subsidiaries

PT CIPUTRA DEVELOPMENT Tbk AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)For Nine Months Ended 30 September 2006 and 2005(In Rupiah)g. Inventories and Land for DevelopmentInventories of land, residential houses and shop houses under construction and completed residentialhouses and shop houses are stated at the lower of cost or net realizable value. The cost is determined usingthe average method. Expenditures relating to land development and improvement including interests andforeign exchange losses on loans obtained to finance the acquisition, development and improvement of theland incurred prior to the completion stage are capitalized as part of the cost of the land.The inventories of the hotel and restaurant (foods, beverages and others) are stated at the lower of cost ornet realizable value. The cost is determined using the first-in, first-out method (FIFO).Land owned by the Company and subsidiaries for future development is classified as “Land forDevelopment”. Upon the commencement of development and construction of infrastructure, the carryingcost of land will be transferred to the inventories or the appropriate property account.h. Property and EquipmentProperty and equipment, except landrights, are stated at cost less accumulated depreciation. Landrights arestated at cost and not amortized. Depreciation is computed using the straight-line method based on theestimated useful lives of the assets as follows:Buildings : 20 – 40 yearsGolf course : 20 yearsFurniture and fixtures : 5 yearsTransportation equipment : 5 yearsProject and golf equipment : 5 yearsThe cost of repairs and maintenance is charged to operations as incurred; significant renewals andbetterments are capitalized. When assets are retired or otherwise disposed of, their costs and the relatedaccumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in thestatements of income for the period.i. Construction in ProgressConstruction in progress is presented under property and equipment and stated at cost. The expenditures,including the borrowing cost, to finance the development and construction of the projects are capitalized aspart of the cost of the construction in progress. Upon substantial completion of the projects and when theassets are ready for their intended use, the accumulated costs will be transferred to the appropriate propertyaccounts.j. Deferred ChargesAdvertising expenses incurred before the opening of a project were deferred and are being amortized over 5years using the straight-line method.Billboard expenses are amortized over 1-3 years using the straight-line method.k. Reserve for Replacement of Hotel and Club House Operating EquipmentReserve for replacement of hotel and club house operating equipment is determined based on the estimatedreplacement value of the lost or damaged items. The replacement cost of the lost or damaged items isrecorded as a deduction to the reserve accounts.l. Impairment of Assets ValueThe Company and subsidiaries conduct an evaluation to determine whether there is an indication for eventsor changes in circumstance which indicate that its carrying amount may not be fully recovered at eachreporting date. If any such indication exists, the Company and subsidiaries are required to determine theestimated recoverable value of all theirs assets and recognize the impairment in assets value as a loss inthe consolidated statements of income.11