PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY - …mercator.in/investors/FinSub2016-17/PT Karya Putra Borneo.pdf · PT Karya Putra Borneo ... Gde Agung Blok 6.2, Kawasan Mega Kuningan,

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2017 AND INDEPENDENT AUDITORS’ REPORT

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY TABLE OF CONTENTS

Page

DIRECTORS’ STATEMENT LETTER INDEPENDENT AUDITORS’ REPORT CONSOLIDATED FINANCIAL STATEMENTS - For the year ended March 31, 2017

Consolidated Statement of Financial Position 1 Consolidated Statement of Profit or Loss and Other Comprehensive Income 3 Consolidated Statement of Changes in Equity 4 Consolidated Statement of Cash Flows 5 Notes to Consolidated Financial Statements 6

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

MARCH 31, 2017

March 31, March 31,

Notes 2017 2016

US$ US$

ASSETS

CURRENT ASSETS

Cash and cash equivalents 5 4,226,990 283,105

Trade accounts receivable 6

Related party 30 - 473,515

Third parties 3,057,642 390,940

Other accounts receivable from third parties 64,671 2,078

Inventories 7 1,187,281 1,575,132

Prepaid taxes 8 3,812 81,707

Prepayments and advances 9 233,723 220,437

Total Current Assets 8,774,119 3,026,914

NONCURRENT ASSETS

Deferred tax assets 28 137,549 84,477

Property, plant and equipment - net of accumulated

depreciation and impairment loss of

US$ 5,973,458 in 2017 and

US$ 3,742,395 in 2016 10 21,586,252 24,007,694

Mining properties 11 13,546,030 16,209,428

Advance for purchase of property, plant and equipment 406,641 406,449

Goodwill 12 2,556,456 2,556,456

Reclamation deposits 13 704,748 695,374

Other noncurrent assets 255,443 242,893

Total Noncurrent Assets 39,193,119 44,202,771

TOTAL ASSETS 47,967,238 47,229,685

See accompanying notes to consolidated financial statements

which are an integral part of the consolidated financial statements.

- 1 -


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

MARCH 31, 2017 (Continued)

March 31, March 31,

Notes 2017 2016

US$ US$

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Trade accounts payable 14

Related parties 30 - 546,226

Third parties 2,253,053 2,085,913

Other accounts payable to third parties 4,002 22,714

Accrued expenses 15 2,325,235 764,577

Taxes payable 16 1,347,386 100,468

Advance from customers 17,30 1,123,767 23,353

Due to a related party 18,30 26,442,685 40,565,240

Total Current Liabilities 33,496,128 44,108,491

NONCURRENT LIABILITIES

Provision for reclamation 19 725,387 588,847

Employee benefits obligations 29 387,579 230,103

Total Noncurrent Liabilities 1,112,966 818,950

EQUITY

Capital stock - Rp 1,000,000 par value per share

Authorized - 200,000 shares in 2017 and

20,000 shares in 2016

Subscribed and paid-up - 78,000 shares in 2017

and 5,000 shares in 2016 20 6,011,375 551,390

Additional paid-in capital 21 34,972 -

Retained earnings (deficit) 2,636,860 (1,325,071)

Equity (capital deficiency) attributable to the owners

of the Company 8,683,207 (773,681)

Non-controlling interests 22 4,674,937 3,075,925

Total Equity 13,358,144 2,302,244

TOTAL LIABILITIES AND EQUITY 47,967,238 47,229,685



- 2 -


CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED MARCH 31, 2017

Notes 2017 2016

US$ US$

SALES 23,30 52,573,993 26,552,242

COST OF GOODS SOLD 24 34,017,579 18,441,052

GROSS PROFIT 18,556,414 8,111,190

Selling expenses 25 (6,719,203) (3,389,257)

General and administrative expenses 26 (1,537,983) (1,009,878)

Financial charges 27 (2,087,858) (3,087,141)

Loss on foreign exchange - net (118,664) (84,411)

Others - net (222,279) 818,572

PROFIT BEFORE TAX 7,870,427 1,359,075

TAX EXPENSE - NET 28 (2,305,970) (381,650)

NET PROFIT FOR THE YEAR 5,564,457 977,425

OTHER COMPREHENSIVE INCOME

Item that will not be reclassified subsequently

to profit or loss:

Remeasurement of defined benefit obligation - net of tax (6,518) 13,577

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 5,557,939 991,002

PROFIT ATTRIBUTABLE TO:

Owners of the Company 3,964,089 763,829

Non-controlling Interest 22 1,600,368 213,596

Net profit for the period 5,564,457 977,425

TOTAL COMPREHENSIVE INCOME

ATTRIBUTABLE TO:


Non-controlling Interest 22 1,596,008 208,794

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 5,557,939 991,002



- 3 -


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


Equity

(capital

deficiency)

Additional Retained attributable

Capital paid-in earnings to owners of Non-controlling Total

Notes stock capital (deficit) the Company interests equity

US$ US$ US$ US$ US$ US$

Balance as of April 1, 2015 551,390 - (2,107,279) (1,555,889) 2,867,131 1,311,242

Net profit for the year - - 763,829 763,829 213,596 977,425

Other comprehensive income

for the year - - 18,379 18,379 (4,802) 13,577

Balance as of March 31, 2016 551,390 - (1,325,071) (773,681) 3,075,925 2,302,244

Issuance of new shares 20 5,459,985 - - 5,459,985 - 5,459,985

Additional paid-in capital 21 - 34,972 - 34,972 - 34,972

Tax amnesty - - - - 3,004 3,004

Net profit for the year - - 3,964,089 3,964,089 1,600,368 5,564,457

Other comprehensive income

for the year - - (2,158) (2,158) (4,360) (6,518)

Balance as of March 31, 2017 6,011,375 34,972 2,636,860 8,683,207 4,674,937 13,358,144



- 4 -


CONSOLIDATED STATEMENT OF CASH FLOWS


2017 2016

US$ US$CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax 7,870,427 1,359,075 Adjustments:

Depreciation expenses 2,397,781 1,041,581 Amortization expenses 4,119,944 1,221,686 Employee benefits obligations 148,785 87,210 Financial charges 2,087,858 3,087,141 Foreign exchange 2,349 7,503 Loss on disposal of property, plant and equipment 614,736 4,762 Interest income (17,470) (20,227)

Operating cash flows before changes in working capital 17,224,410 6,788,731 Changes in working capital:

Trade accounts receivable (2,193,187) (682,271) Other accounts receivable from third parties (62,593) 1,152,744 Inventories 387,851 (728,585) Prepaid taxes 23,572 226,964 Prepayments and advances (13,286) 1,525,966 Reclamation deposits (11,723) (184,046) Other noncurrent assets (12,550) (4,473) Trade accounts payable (379,086) 661,375 Other accounts payable to third parties (18,712) (19,163) Advance from customers 1,100,414 - Advance from a related party - (3,094,865) Accrued expenses 1,560,658 (391,285) Taxes payable 189,392 (66,643) Provision for reclamation 136,540 135,987

Cash generated from operations 17,931,700 5,320,436 Payments of employee benefits - (13,367) Cash received from tax refund 54,323 - Payment of income tax (1,299,343) (399,562)

Net Cash Provided by Operating Activities 16,686,680 4,907,507

CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of property, plant and equipment (590,716) (1,135,296) Acquisition of mining properties (1,456,546) (3,125,405) Advance for purchase of property, plant and equipment (192) (5,331) Interest income received 17,470 20,227 Proceeds from sale of property, plant and equipment 9,602 2,299 Proceeds from issuance of capital 5,488,000 -

Net Cash Provided by (Used in) Investing Activities 3,467,618 (4,243,506)

CASH FLOWS FROM FINANCING ACTIVITIESPayment of due to related party (15,768,626) (1,735,000) Proceed from due to related party - 680,000

Payment of financial charges (441,787) (37,207)

Net Cash Used in Financing Activities (16,210,413) (1,092,207)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,943,885 (428,206)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 283,105 711,311

CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,226,990 283,105

See accompanying notes to consolidated financial statementswhich are an integral part of the consolidated financial statements.

- 5 -

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2017 AND FOR THE YEAR THEN ENDED

- 6 -

1. GENERAL

a. Establishment and General Information PT Karya Putra Borneo (“the Company”) was established in Balikpapan based on deed No. 05 dated September 10, 2007 of Hamid Gunawan, S.H., notary in Balikpapan. The deed of establishment was approved by the Ministry of Justice and Human Rights of the Republic of Indonesia in its Decision Letter No. C-03412.HT.01.01-TH.2007 dated November 15, 2007. The Company’s articles of association have been amended several times, most recently by deed No. 02 of Suparman Hasyim, S.H., notary in Jakarta, dated January 5, 2017 concerning the changes in authorized, subscribed and paid-up capital of the Company. This deed was approved by the Ministry of Justice and Human Rights of the Republic of Indonesia in his decision letter No. AHU-AH.01.03-0017959 dated January 17, 2017.

The Company’s head office is located at Menara Prima Tower 1, Jalan DR. Ide Anak Agung Gde Agung Blok 6.2, Kawasan Mega Kuningan, Jakarta, with its mining site located in Samarinda, East Kalimantan.

In accordance with article 3 of the Company’s articles of association, the scope of its activities is mainly to engage in coal mining activities. The Company started its commercial operations in July 2012. The Company and its subsidiary (the Group) had total number of employees of 189 and 186 at March 31, 2017 and 2016, respectively.

The Company belongs to a group of companies owned by Mercator Limited a group listed on the National Stock Exchange and Bombay Stock Exchange in India. The Company’s management at March 31, 2017: Board of Commissioner President Commissioner : Atul Agarwal Board of Director Director : Kirtipal Singh Raheja

b. Consolidated Subsidiary

Details of the Group’s subsidiary at the end of the reporting period are as follows:

Start of

Nature of Percentage of Commercial March 31, March 31,

Domicile Business Ownership Operations 2017 2016

US$ US$

PT Indo Perkasa (IPK) Jakarta Mining services 51% 2012 24,746,572 24,600,936

Subsidiary

Total

Assets Before Elimination

c. Mining and Other Rights

1. Based on decision of the Regents of Kutai Kartanegara regarding Approval of Production Operation Mining Permit (IUP OP) No. 540/136/IUP-OP/MB-PBAT/VIII/2011 dated August 12, 2011, the Government issued IUP Exploration to the Company for the 914-hectare land in Loa Janan, Batuah Village, Kutai Kartanegara, East Kalimantan.

The IUP OP granted for 12 years includes the construction for 1 year, production for 10 years, and post-mining for 1 year. The permit expires on August 12, 2023.

2. Based on letter No. 503/194/IUJP/BPPMD-PTSP/II/2015 dated February 15, 2015, IPK is granted mining service permit (Izin Usaha Jasa Pertambangan) by the Local Government of East Borneo for 5 years and can be extended.

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2017 AND FOR THE YEAR THEN ENDED - Continued

- 7 -

3. Based on Dock Permit Letter No. 552.3/952/Dishub/VII/2011 dated July 1, 2011, the Government granted permit to IPK to operate a special dock located at the shipping line of Mahakam River as a mooring facility/ dock ship/ barge to its own interest to support the loading/unloading of coal of production.

4. Based on decision of Indonesia Investment Coordination Board (BKPM) regarding

Approval of Production Operating Permit (IUP OP) for foreign investment in coal commodity No.39/1/IUP/PMA/2016 dated November 15, 2016, the Government issued IUP to the Company for the 914-hectare land in Loa Janan, Batuah Village, Kutai Kartanegara, East Kalimantan valid until August 12, 2023.

d. Proven Reserve

Based on the assessment of PT GMT Indonesia dated September 20, 2011, the proven reserve of Company’s coal is at 34,073,100 tonnes. As of March 31, 2017 and 2016, the management estimates that the proven reserve is at 28,277,089 and 29,929,048 tonnes (unaudited), respectively.

2. ADOPTION OF NEW AND REVISED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS (“PSAK”) AND INTERPRETATIONS OF PSAK (“ISAK”)

a. Standards and amendments effective in the current year

In the current year, the Group has applied a new standard, a number of amendments, and an interpretation to PSAK issued by the Financial Accounting Standard Board of the Indonesian Institute of Accountants that are relevant to its operations and effective for accounting period beginning on January 1, 2016.

PSAK 70, Accounting for Tax Amnesty Asset and Liability The new standard specifically prescribes the accounting for tax amnesty asset and liability in relation to the application of Tax Amnesty Law. PSAK 70 provides two (2) accounting policy choices for an entity who recognizes assets and liabilities in relation to the provision of the Tax Amnesty Law based on Declaration Letter for Tax Amnesty as whether: 1. use the existing PSAK, or 2. use the specific provisions in paragraph 10 - 23 of PSAK 70.

The major differences between the two choices are related to the measurement, presentation and disclosures of the assets and liabilities and whichever is chosen by an entity, it has to be consistently applied to all Tax Amnesty assets and liabilities. The standard is effective on July 1, 2016 consistent with the enactment of the Tax Amnesty Law.

The application of the following amendments, and interpretation to standards have not resulted to material impact to disclosures or on the amounts recognized in the current and prior period consolidated financial statements:

Amendments to PSAK 4, Separate Financial Statements

Amendments to PSAK 7, Related Party Disclosures

Amendments to PSAK 16, Property, Plant and Equipment

Amendments to PSAK 19, Intangible Assets

Amendments to PSAK 22, Business Combination

Amendments to PSAK 24, Employee Benefits

Amendments PSAK 25, Accounting Policies, Changes in Accounting Estimates and Errors


- 8 -

Amendments to PSAK 65, Consolidated Financial Statements

Amendments to PSAK 68, Fair Value Measurement

b. Standard and interpretations issued not yet adopted

New standards, amendments and interpretation effective for periods beginning on or after January 1, 2017, with early application permitted are the following:

PSAK 1: Presentation of Financial Statements about Disclosure Initiative

Standard and amendment to standard effective for periods beginning on or after January 1, 2018, with early application permitted are:

Amendments to PSAK 16: Property, Plant and Equipment

As of the issuance date of the consolidated financial statements, the effect of adoption of these standards, amendments and interpretations on the consolidated financial statements is not known nor reasonably estimable by management.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of Compliance

The consolidated financial statements of the group have been prepared in accordance with Indonesian Financial Accounting Standards.

b. Basis of Preparation The consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The consolidated statement of cash flows is prepared using the indirect method with classifications of cash flows into operating, investing and financing activities.

c. Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiary. Control is achieved where the Company has the power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.


- 9 -

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including (i) the size of the Company’s holding of voting rights relative to the size and dispersion of holding of the other vote holders; (ii) potential voting rights held by the Company, other vote holders or other parties; (iii) rights arising from other contractual arrangements; and (iv) any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expense of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interest. Total comprehensive income of subsidiaries is attributed to the owners of the Company and the non-controlling interest even if this results in the non-controlling interest having a deficit balance. Where necessary, adjustments are made to the financial statements of the subsidiary to bring the accounting policies used in line with those used by the Group. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Changes in the Group’s ownership interest in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interest and the non-controlling interest are adjusted to reflect the changes in their relative interest in the subsidiaries. Any difference between the amount by which the non-controlling interest are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interest. All amounts previously recognized in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable accounting standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under PSAK 55, Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

d. Business Combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree, and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognized in profit or loss as incurred.


- 10 -

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value except for certain assets and liabilities that are measured in accordance with the relevant standards. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquire (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after the reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase option. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another accounting standard. When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments 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. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured subsequent to reporting dates in accordance with the relevant accounting standards, as appropriate, with the corresponding gain or loss being recognized in profit or loss or in other comprehensive income. When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interests were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amount recognized as of that date.


- 11 -

e. Foreign Currency Transactions and Translation

The consolidated financial statements are measured and presented in U.S Dollar (US$), which is the functional currency for the financial statements. In preparing the consolidated financial statements of the Group, transactions in currencies other than the Group’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognized in profit or loss in the period in which they arise.

f. Transaction with Related Parties

A related party is person or entity that is related to the Group (the reporting entity):

a. A person or a close member of that person’s family is related to the reporting entity if that person: i. has control or joint control over the reporting entity; ii. has significant influence over the reporting entity; or iii. is a member of the key management personnel of the reporting entity or of a parent

of the reporting entity.

b. An entity is related to the reporting entity if any of the following conditions applies:

i. The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

ii. One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

iii. Both entities are joint ventures of the same third party. iv. One entity is a joint venture of a third entity and the other entity is an associate of

the third entity. v. The entity is a post-employment benefit plan for the benefit of employees of either

the reporting entity, or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.

vi. The entity is controlled or jointly controlled by a person identified in (a). vii. A person identified in (a) (i) has significant influence over the entity or is a member

of the key management personnel of the entity (or a parent of the entity). viii. The entity, or any member of a group of which it is a part, provides key management

personnel services to the reporting entity or to the parent of the reporting entity.

g. Financial Assets

All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract which terms require delivery of the financial assets within the time frame established by the market concerned, and are initially measured at fair value plus transaction costs. The Group’s financial assets are classified as loans and receivables.


- 12 -

Loans and receivables

Cash in and cash equivalent, except cash on hand and trade accounts receivables that have fixed or determinable payments that are not quoted in an active market are classified as “loans and receivables”. Loans and receivables are measured at amortized cost using the effective interest method less impairment. Interest is recognised by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial. Effective interest method

The effective interest method is a method of calculating the amortized cost of a financial instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or, where appropriate, a shorter period to the net carrying amount on initial recognition. Impairment of financial assets

Loans and receivables are assessed for indicators of impairment at each reporting date. Loans and receivables are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the loans and receivables, the estimated future cash flows of the loans and receivables have been affected. Objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or

default or delinquency in interest or principal payments; or

it is becoming probable that the borrower will enter bankruptcy or financial re-organisation.

Loans and receivables that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experiences of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

The amount of the impairment on loans and receivables is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the receivables is reduced by the impairment loss through the use of an allowance account. When a receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.


- 13 -

Derecognition of financial assets The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received. On derecognition of financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

On derecognition of financial asset other than its entirety (e.g., when the Group retains an option to repurchase part of a transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

h. Financial Liabilities and Equity Instruments

Classification as debt or equity

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Financial liabilities at amortized cost

Trade and other payables and other borrowings are initially measured at fair value, net of transaction costs, and are subsequently measured at amortized cost, using the effective interest method, with interest expense recognized on an effective yield basis.

Derecognition of financial liabilities

The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.


- 14 -

i. Netting of Financial Asset and Financial Liabilities

The Group only offsets financial assets and liabilities and presents the net amount in the statement of financial position where it:

currently has a legal enforceable right to set off the recognized amount; and

intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

j. Inventories

Inventories are stated at cost or net realizable value, whichever is lower. Cost is determined using the weighted average method. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

k. Prepaid Expenses

Prepaid expenses are amortized over their beneficial periods using the straight-line method.

l. Property, Plant and Equipment

Property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated at cost, less accumulated depreciation and any accumulated impairment losses.

Depreciation is recognized so as to write-off the cost of assets less residual values using the following method:

Depreciation Prior to

method Year 2017 April 1, 2016

Coal Crusher Plant Unit production 30,000,000 MT 60,000,000 MT

Land improvements Straight-line 10 - 20 years 20 years

Building Straight-line 20 years 20 years

Weight bridge Double declining 4 years 4 years

Vehicle Double declining/ 4 years 4 years

Straight-line

Heavy equipment Double declining/ 4 years 4 years

Straight-line

Furniture, fixture and office equipment Double declining 4 years 4 years

Unit of measure

Starting April 1, 2016, the Company changed the estimated useful lives of Coal Crusher Plant and Land Improvement, based on the Company’s assessment on the remaining estimated useful life of the assets. This change was applied prospectively.

The estimated useful lives, unit of production, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

Land is stated at cost and is not depreciated.

The cost of maintenance and repairs is charged to operations as incurred. Other costs incurred subsequently to add to, replace part of, or service an item of property, plant and equipment, are recognised as asset if, and only if it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably.


- 15 -

When assets are retired or otherwise disposed of, their carrying values are removed from the accounts and any resulting gain or loss is reflected in the profit or loss. Construction in progress is stated at cost. Construction in progress is transferred to the respective property, plant and equipment account when completed and ready for use.

m. Exploration and Evaluation Assets

Exploration and evaluation activity involves the search for mineral resources, determination of the technical feasibility and assessment of the commercial viability of the mineral resource. Exploration and evaluation expenditures comprise of costs that are directly attributable to:

acquisition of rights to explore;

topographical, geological, geochemical and geophysical studies;

exploratory drilling;

trenching and sampling; and

activities involved in evaluating the technical feasibility and commercial viability of extracting mineral resources.

Exploration and evaluation assets related to an area of interest is written-off as incurred, unless they are capitalised and carried forward, on an area of interest basis, provided one of the following conditions is met: (i) the costs are expected to be recovered through successful development and exploitation

of the area of interest or, alternatively, by its sale; or (ii) exploration activities in the area of interest have not yet reached the stage which permits

a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in or in relation to the area of interest are continuing.

Capitalised costs include costs directly related to exploration and evaluation activities in the relevant area of interest. General and administrative costs are allocated to an exploration or evaluation asset only to the extent that those costs can be related directly to operational activities in the relevant area of interest. Exploration and evaluation assets are recorded at cost less impairment charges. As the asset is not available for use, it is not depreciated. Exploration and evaluation assets are assessed for impairment if facts and circumstances indicate that impairment may exist. Exploration and evaluation assets are also tested for impairment once commercial reserves are found, before the assets are transferred to mining properties.

n. Mining Properties When mines are capable of operating in the manner intended by the management, exploration and evaluation assets are transferred to mining properties. Amortization is charged using the units of production method. Mining properties are tested for impairment in accordance with the policy described in Note 3p.


- 16 -

o. Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in subsequent period.

On disposal of the subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

p. Impairment of Non-Financial Assets

At the end of each reporting period, the Group reviews the carrying amount of non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

Estimated recoverable amount is the higher of fair value less cost to sell and value in use. In assessing value in use, the estimated 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 for which the estimates of future cash flows have not been adjusted. If the recoverable amount of the non-financial asset (cash generating unit) is less than its carrying amount, the carrying amount of the asset (cash generating unit) is reduced to its recoverable amount and an impairment loss is recognized immediately against earnings. Accounting policy for impairment of financial asset is explained in Note 3g and for impairment of goodwill in Note 3o.

q. Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. As lessee Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.


- 17 -

r. Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

s. Revenue and Expense Recognition

Sale of Coal

Revenue from sale of coal is recognised when all of the following conditions are satisfied:

the Group has transferred to the buyer the significant risks and rewards of ownership of the coal;

the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the coal sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow to the Group; and

the cost incurred or to be incurred in respect of the transaction can be measured reliably.

Rendering of services Revenue from contracts to provide services is recognised when the services are rendered. Interest income

Interest income is accrued on time basis, by reference to the principal outstanding and at the applicable interest rate. Expenses

Expenses are recognised when incurred.

t. Employee Benefits Obligations The Group provides defined employee benefits to its employees in accordance with Labor Law No. 13/2003. No funding has been made to the defined benefit plans.

The cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:


- 18 -

Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements).

Net interest expense or income

Remeasurement

The Group presents the first two components of defined benefit costs in profit or loss. Curtailment gains and losses are accounted for as past service costs.

u. Income Tax

The tax currently payable is based on taxable profit to the year. Taxable profit differs from profit before tax as reported in the consolidated statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.

Current tax expense is determined based on the taxable income for the year computed using prevailing tax rates.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary differences arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary differences arises from the initial recognition of goodwill.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on the tax rates (and tax laws) that have been enacted, or substantively enacted, by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. The carrying amount of deferred tax asset is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items that are recognized outside of profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognized outside of profit or loss.

4. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES

In the application of the Group’s accounting policies, which are described in Note 3, the directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.


- 19 -

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Critical Judgments in Applying Accounting Policies

In the process of applying the accounting policies described in Note 3, management has not made any critical judgment that has significant impact on the amounts recognised in the consolidated financial statements, apart from those involving estimates, which are dealt with below. Key Sources of Estimation Uncertainty

The key assumptions concerning future and other key sources of estimation at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Impairment Loss on Loans and Receivables

The Group assesses its loans and receivables for impairment at each reporting date. In determining whether an impairment loss should be recorded in profit or loss, management makes judgment as to whether there is objective evidence that loss event has occurred. Management also makes judgment as to the methodology and assumptions for estimating the amount and timing of future cash flows which are reviewed regularly to reduce any difference between loss estimate and actual loss. The carrying amounts of loans and receivables are disclosed in Notes 5 and 6.

Estimated Useful Lives of Property, Plant and Equipment

The useful live of each item of the Group’s property, plant and equipment are estimated based on the period over which the asset is expected to be available for use. Such estimation is based on internal technical evaluation and experience with similar assets. The estimated useful lives of each asset is reviewed periodically and updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the asset. It is possible, however, that future results of operations could be materially affected by changes in the amounts and timing of recorded expenses brought about by changes in the factors mentioned above.

A change in the estimated useful lives of any item of property, plant and equipment would affect the recorded depreciation expense and decrease in the carrying values of property, plant and equipment.

The carrying amounts of property, plant and equipment are disclosed in Note 10.

Estimated Coal Reserves

Proven reserves are estimates of the output that can be economically and legally exploited from the Group’s mining properties. The Group determines and report its mineral reserves under the principles incorporated in the Code for Reporting of Mineral Resources and Ore Reserves (the “JORC Code”) of the Australasian Joint Ore Reserves Committee (“JORC”). In order to estimate mineral reserves, assumptions are required about a range of geological, technical and economic factors, including quantities, production techniques, stripping ratio, production costs, transport costs, commodity demand, commodity prices and exchange rates.

Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data are generated during the course of operations, estimates of reserves may change from period to period.


- 20 -

Impairment of Goodwill

The Group assesses its goodwill for impairment at each reporting date. In determining whether an impairment loss should be recorded in profit or loss, management makes judgment as to whether there is objective evidence that loss event has occurred. Management also makes judgment as to the methodology and assumptions for estimating the amount and timing of future cash flows which are reviewed regularly. Goodwill is described in Note 12.

Employee benefits

The determination of employee benefits obligation is dependent on selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include among others, discount rate and rate of salary increase. Actual results that differ from the Group’s assumptions are accumulated and amortized over future periods and therefore, generally affect the recognized expense and recorded obligation in such future periods. While it is believed that the Group’s assumptions are reasonable and appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the Group’s employee benefits obligations (Note 29).

Impairment of Non-Financial Assets

The Group reviews its non-financial assets for any indication of impairment at each reporting date. If any such indication exist, management estimates the recoverable amount of the non-financial assets. Determining the value in use requires the estimation of cash flows expected to be generated from the continued use and ultimate disposition of such non-financial assets (cash generating unit) and a suitable discount rate in order to calculate the present value. While it is believed that the assumptions used in the estimation of the value in use of non-financial assets reflected in the financial statements are appropriate and reasonable, significant changes in these assumptions may materially affect the assessment of recoverable values and any resulting impairment loss could have a material adverse impact on the results of operations.

5. CASH AND CASH EQUIVALENTS

March 31, March 31,

2017 2016

US$ US$

Cash on hand 79,363 23,264

Cash in banks

U.S. Dollar

PT Bank Mandiri (Persero) Tbk 740,536 33,893

PT Bank Danamon Indonesia Tbk 697,473 173,765

Rupiah

PT Bank Danamon Indonesia Tbk 111,224 51,942

PT Bank Mandiri (Persero) Tbk 98,394 241

Time deposits in U.S. Dollar with interest rates

per annum at 1.3% 2,500,000 -

Total 4,226,990 283,105


- 21 -

6. TRADE ACCOUNTS RECEIVABLE

March 31, March 31,

2017 2016

US$ US$

a. By debtors

Related party

MCS Holding Pte. Ltd. (Note 30) - 473,515

Third parties

PT Baramulti Sukses Sarana 1,099,220 195,325

LG International Corp 993,794 -

Gas Oil Division Limited 896,811 -

PT Rinjani Kertanegara 67,817 183,521

CV Kumala Energy - 8,448

Others - 3,646

Total 3,057,642 390,940

b. Aging

Not yet due 1,099,220 676,692

Past due:

Under 30 days 1,939,340 114,840

31 - 60 days 19,082 44,623

61 - 90 days - -

More than 90 days - 28,300

Total 3,057,642 864,455

c. By currency

U.S. Dollar 3,033,607 669,137

Rupiah 24,035 195,318

Total 3,057,642 864,455

No allowance for impairment loss was provided on receivables from related and third parties as management believes that all such receivables are collectible.

7. INVENTORIES

March 31, March 31,

2017 2016

US$ US$

Coal 906,562 1,387,299

Spareparts 224,941 181,405

Fuel 55,778 6,428

Total 1,187,281 1,575,132

Management believes that all inventories are usable and/or saleable, and an allowance for obsolescence and damaged of inventories is therefore not considered necessary.


- 22 -

8. PREPAID TAXES

March 31, March 31,

2017 2016

US$ US$

Corporate income tax

2014 - 52,538

2013 - 1,785

Value-added tax (VAT)-net - 23,501

Other tax receivable 3,812 3,883

Total 3,812 81,707

In August 2016, the Company received income tax overpayment assessment letter (SKPLB) dated July 22, 2016 for corporate income tax fiscal year 2014 amounting to US$ 68,900 and based on tax overpayment refund instructions (SPMKP) dated August 18, 2016, all of the overpayment above has been compensated to corporate income tax of 2015 fiscal year.

In April 2016, IPK received income tax overpayment assessment letter (SKPLB) dated April 15, 2016 for corporate income tax fiscal year 2014 amounting to US$ 48,726. The difference was charged to consolidated statement profit or loss and other comprehensive income for the year. The tax refund has been received in June 2016.

9. PREPAYMENTS AND ADVANCES

March 31, March 31,

2017 2016

US$ US$

Prepayments

Rental 60,709 80,642

Insurance 10,315 7,772

Others 7,844 -

Subtotal 78,868 88,414

Advances

Suppliers 103,443 65,231

Employees 51,412 66,792

Subtotal 154,855 132,023

Total 233,723 220,437


- 23 -

10. PROPERTY, PLANT AND EQUIPMENT

April 1, 2016 Additions Deductions Reclassifications March 31, 2017

US$ US$ US$ US$ US$

At cost:

Land 7,446,634 68,240 - - 7,514,874

Land improvements 10,133,984 - 750,033 - 9,383,951

Coal crusher plant 7,744,817 - - - 7,744,817

Building 447,346 63,956 - 24,876 536,178

Furniture, fixture and

office equipment 643,181 106,274 - - 749,455

Vehicles 568,420 - - - 568,420

Weight bridge 63,990 - - - 63,990

Heavy equipment 693,604 345,444 41,023 - 998,025

Construction in progress 8,113 16,763 - (24,876) -

Total 27,750,089 600,677 791,056 - 27,559,710

Accumulated depreciation

and impairment loss:

Land improvements 1,191,187 965,160 159,382 - 1,996,965

Coal crusher plant 1,551,766 961,969 - - 2,513,735

Building 115,818 33,564 - - 149,382



Vehicles 248,224 97,826 - - 346,050

Weight bridge 58,593 5,343 - - 63,936

Heavy equipment 70,748 257,916 7,336 - 321,328

Total 3,742,395 2,397,781 166,718 - 5,973,458

Net Carrying Value 24,007,694 21,586,252

April 1, 2015 Additions Deductions Reclassifications March 31, 2016

US$ US$ US$ US$ US$

At cost:

Land 7,331,821 114,813 - - 7,446,634

Land improvements 10,133,984 - - - 10,133,984

Coal crusher plant 7,744,817 - - - 7,744,817

Building 411,470 35,876 - - 447,346



Vehicles 369,777 218,536 19,893 - 568,420

Weight bridge 63,990 - - - 63,990

Heavy equipment - 693,604 - - 693,604

Construction in progress - 8,113 - - 8,113

Total 26,634,686 1,135,296 19,893 - 27,750,089

Accumulated depreciation

and impairment loss:

Land improvements 689,157 502,030 - - 1,191,187

Coal crusher plant 1,287,976 263,790 - - 1,551,766

Building 77,644 38,174 - - 115,818



Vehicles 206,080 54,976 12,832 - 248,224

Weight bridge 53,197 5,396 - - 58,593

Heavy equipment - 70,748 - - 70,748

Total 2,713,646 1,041,581 12,832 - 3,742,395

Net Carrying Value 23,921,040 24,007,694


- 24 -

Disposal of property, plant and equipment is as follows:

2017 2016

US$ US$

Proceeds 9,602 2,299

Net carrying value 624,338 7,061

Loss from disposal of property and equipment 614,736 4,762

Depreciation expense was allocated to the following:

2017 2016

US$ US$

Cost of goods sold (Note 24) 2,330,367 993,664

General and administrative expenses (Note 26) 67,414 47,917

Total 2,397,781 1,041,581

11. MINING PROPERTIES

April 1, March 31,

2016 Additions 2017

US$ US$ US$

Cost 18,796,860 1,456,546 20,253,406

Accumulated amortization (2,587,432) (4,119,944) (6,707,376)

Net 16,209,428 13,546,030

April 1, March 31,

2015 Additions 2016

US$ US$ US$

Cost 15,671,455 3,125,405 18,796,860

Accumulated amortization (1,365,746) (1,221,686) (2,587,432)

Net 14,305,709 16,209,428

All amortization expense is allocated to cost of goods sold (Note 24).

12. GOODWILL

This account represents goodwill from the acquisition of 51% equity ownership or 51 shares of IPK. The Company assessed the recoverable amount of goodwill and determined that there is no impairment of goodwill.

13. RECLAMATION DEPOSITS This account represents deposits for reclamation guarantee as required by local government.


- 25 -

14. TRADE ACCOUNTS PAYABLE

March 31, March 31,

2017 2016

US$ US$

Related parties (Note 30)

PT Mincon Indo Resources - 338,840

PT Oorja Indo KGS - 190,681

PT Nuansa Sakti Kencana - 16,705

Total - 546,226

Third parties 2,253,053 2,085,913

15. ACCRUED EXPENSES

March 31, March 31,

2017 2016

US$ US$

Heavy equipment rent 822,675 391,802

Bonus 500,000 250,000

Hauling road 317,726 -

Professional fees 317,106 49,182

Royalty 153,714 -

Fuel 74,119 26,660

Others (below US$ 50,000 each) 139,895 46,933

Total 2,325,235 764,577

16. TAXES PAYABLES

March 31, March 31,

2017 2016US$ US$

Corporate income tax (Note 28) 1,075,585 18,059

Income taxes

Article 4(2) 624 526

Article 15 28,939 1,653

Article 21 52,682 16,620

Article 23 2,868 63,610

Article 25 12,622 -

VAT-net 174,066 -

Total 1,347,386 100,468


- 26 -

17. ADVANCE FROM CUSTOMERS

March 31, March 31,

2017 2016

US$ US$

Related Party (Note 30)

PT Oorja Indo KGS - 23,353

Third Parties 1,123,767 -

Total 1,123,767 23,353

18. DUE TO A RELATED PARTY

March 31, March 31,

2017 2016

US$ US$

Oorja Batua Pte. Ltd. 18,979,374 33,748,000

Processing fee - 1,000,000

Accrued interest 7,463,311 5,817,240

Total 26,442,685 40,565,240

Due to a related party pertains to loan facility obtained from Oorja Batua Pte. Ltd. (Note 30). The details of loans are as follows:

On December 3, 2010, the Company obtained uncommitted loan facility with maximum limit of US$ 20,000,000. This loan bears interest and is payable on demand. This loan has been settled in February 2017.

On April 5, 2012, the Company obtained intercompany loan facility with maximum limit of US$ 15,000,000. This loan bears interest of LIBOR plus a fixed rate and is payable on demand. The outstanding balance of this facility as March 31, 2017 and 2016 amounted to US$ 7,573,264 and 11,172,000, respectively.

On April 11, 2014, IPK obtained a loan facility with maximum limit of US$ 4,000,000. The loan bears interest of 3 months LIBOR plus a fixed rate, unsecured and repayable on demand. This loan has been settled in May 2016.

On March 21, 2016, IPK entered into a loan agreement with maximum amount of US$ 20,000,000. The loan is secured by IPK’s share owned by the Company. The loan bears interest of 3 months LIBOR plus a fixed rate and payable on demand. This loan agreement also requires IPK to pay loan processing fee amounting US$ 1,000,000. The outstanding balance of this facility as March 31, 2017 and 2016 amounted to US$ 11,406,110 and nil, respectively.

19. PROVISION FOR RECLAMATION

March 31, March 31,

2017 2016

US$ US$

Beginning balance 588,847 452,860

Provision during the period (Note 24) 147,860 144,539

Realisation (11,320) (8,552)

Total 725,387 588,847


- 27 -

This account pertains to the estimated liability for reclamation of the disturbed mine area at the end of the mine life. Management believes that the provision is adequate to cover all obligation for environmental rehabilitation. Management further believes that the provision is in accordance with the requirement of the existing regulation.

20. CAPITAL STOCK

Number of Percentage of Total Paid-up

Name of Stockholders Shares Ownership Capital Stock

% US$

PT Indo Karya Perdana 42,400 54.36 3,251,117

Oorja (Batua) Pte. Ltd. 35,100 45.00 2,705,119

Ardiansyah Muchsin 500 0.64 55,139

Total 78,000 100.00 6,011,375

March 31, 2017

Number of Percentage of Total Paid-up

Name of Stockholders Shares Ownership Capital Stock

% US$

Oorja Batua Pte. Ltd. 2,500 50.00 275,695

Curators 2,000 40.00 220,556

Ardiansyah Muchsin 500 10.00 55,139

Total 5,000 100.00 551,390

March 31, 2016

On December 16, 2016, PT Indo Karya Perdana agreed to buy 2,250 shares of the Company from Oorja Batua Pte. Ltd. and Curators agreed to sell 2,000 shares of the Company to Oorja Batua Pte. Ltd. Based on deed No. 02 dated January 5, 2017 of Suparman Hasyim S.H. in South Jakarta, the Company’s shareholders approved to increase authorized share capital from Rp 20,000,000,000 (US$ 2,205,558) to Rp 200,000,000,000 (US$ 13,462,977) and to increase the Company's issued and paid up capital from Rp 5,000,000,000 (US$ 551,390) to Rp 78,000,000,000 (US$ 6,011,375) by issuing 73,000 new shares with share distribution 32,850 shares for Oorja Batua Pte.Ltd. and 40,150 shares for PT Indo Karya Perdana.

21. ADDITIONAL PAID-IN CAPITAL This account mostly represents the difference between the exchange rate on the date of the Company’s Article of Association and the exchange rate prevailing when the Company received payment for the capital stock subscriptions.

22. NON-CONTROLLING INTERESTS As of March 31, 2017, non-controlling interest of subsidiary is PT Indo Karya Perdana. The non-controlling interest in net assets of subsidiary as of March 31, 2017 and 2016 amounted to US$ 4,674,937 and US$ 3,075,925, respectively, while the non-controlling interest in total comprehensive income in 2017 and 2016 amounted to US$ 1,596,008 and US$ 208,794, respectively.


- 28 -

Summarized financial information in respect of the Group’s subsidiary that has material non-controlling interest is set out below. The summarized financial information below represents amounts before intragroup eliminations.

March 31, 2017 March 31, 2016

US$ US$

PT Indo Perkasa

Current assets 3,420,316 794,332

Noncurrent assets 21,326,256 23,806,604

Total Assets 24,746,572 24,600,936

Current liabilities 15,006,960 18,224,421

Noncurrent liabilities 198,921 99,113

Total Liabilities 15,205,881 18,323,534

Revenue 16,908,562 9,724,692

Expenses 13,642,504 9,288,782

Profit for the year 3,266,058 435,910

Profit atributable to:


Noncontrolling interest 1,600,368 213,596

Profit for the year 3,266,058 435,910

Comprehensive income attributable to:


Noncontrolling interest 1,596,008 208,794

Comprehensive income for the year 3,257,159 426,110

Net cash inflow (outflow) from:

Operating activities 6,743,752 3,944,246

Investing activities (251,541) 82,723

Financing activities (5,123,089) (4,270,935)

23. SALES

2017 2016

US$ US$

Sales of coal 40,881,095 19,556,440

Hauling 5,926,648 3,219,240

Loading and crushing 5,766,250 3,776,562

Total 52,573,993 26,552,242

55% and 65% in 2017 and 2016 of the above sales were made to related parties (Note 30).


- 29 -

24. COST OF GOODS SOLD

2017 2016

US$ US$

Transportation 5,544,251 3,344,588

Rental 4,656,457 912,172

Amortization (Note 11) 4,119,944 1,221,686

Coal getting 3,582,178 229,286

Salaries and allowances 3,443,954 1,648,003

Depreciation (Note 10) 2,330,367 993,664

Stockpile operation 2,191,050 1,560,457

Crushing 2,047,457 1,452,465

Technical fees 1,313,443 1,973,333

Repair and maintenance 1,161,273 198,154

Housing expenses 475,916 135,958

Community development 467,816 448,425

Security 427,094 -

Freight and shipment expenses 280,537 -

Hauling road maintanance 205,878 218,209

Staff welfare 157,717 291,607

Provision for reclamation (Note 19) 147,860 144,539

Coal analysis 132,749 207,447

Overburden - 3,742,552

Others 850,901 386,435

Cost of goods manufactured 33,536,842 19,108,980

Coal finished goods

Beginning balance 1,387,299 719,371

Ending balance (906,562) (1,387,299)

Total 34,017,579 18,441,052

25. SELLING EXPENSES

2017 2016

US$ US$

Loading retribution 3,021,320 1,368,936

Technical fee 1,738,443 909,630

Royalties 1,527,190 664,320

Loading fee 432,250 446,371

Total 6,719,203 3,389,257


- 30 -

26. GENERAL AND ADMINISTRATIVE EXPENSES

2017 2016

US$ US$

Professional fees 606,098 188,808

Salary and allowance 431,987 484,372

Permit 109,400 63,176

Depreciation (Note 10) 67,414 47,917

Office expenses 65,743 50,150

Rental expenses 55,721 84,060

Travelling 47,711 42,262

Others 153,909 49,133

Total 1,537,983 1,009,878

27. FINANCIAL CHARGES

2017 2016

US$ US$

Interest on due to a related party 2,034,265 2,049,935

Bank administration 37,558 31,640

Loan transaction fee - 1,000,000

Others 16,035 5,566

Total 2,087,858 3,087,141

28. INCOME TAXES

Tax expense of the Group consists of the following:

2017 2016

US$ US$

Current tax (2,356,869) (410,139)

Deferred tax 50,899 28,489

Tax expense (2,305,970) (381,650)


- 31 -

Current Tax Reconciliation between profit before tax per consolidated statement of profit or loss and other comprehensive income and taxable income is as follows:

2017 2016

US$ US$Profit before tax per consolidated statement

of profit or loss and other comprehensive income 7,870,427 1,359,075 Profit before tax of subsidiary 4,371,104 599,031

Profit before tax of the Company 3,499,323 760,044

Temporary differences :Provision for employee benefits 60,842 48,928 Difference between commercial and fiscal depreciation 44,381 19,350

Total 105,223 68,278

Nondeductible expenses (nontaxable income):Interest expenses 1,123,694 - Benefits in kind 134,294 239,307 Community development - 241,576 Interest income already subject to final tax (15,474) (19,162) Others 61,860 24,050

Total 1,304,374 485,772

Taxable income before fiscal carryforward 4,908,920 1,314,093

Fiscal loss adjusment from prior year - (371,698)

Taxable income 4,908,920 942,395

Current tax expenseThe Company 1,227,230 235,598 Subsidiary 1,129,639 174,541

Total current tax expense 2,356,869 410,139

Less prepaid income tax:Article 22 635,377 208,418 Article 23 402,839 161,216 Article 25 243,068 22,446

Total 1,281,284 392,080

Current tax payable (Note 16) 1,075,585 18,059


- 32 -

Deferred Tax The details of the Group's deferred tax assets are as follows:

Credited to

Credited other comprehensive

April 1, to profit or loss income March 31,

2016 for the year for the period 2017

US$ US$ US$ US$

Employee benefits obligation 57,527 37,196 2,173 96,896

Difference between commercial

and fiscal depreciation 26,950 13,703 - 40,653

Deferred tax assets 84,477 50,899 2,173 137,549

Charged to

Credited other comprehensive

April 1, to profit or loss income March 31,

2015 for the year for the period 2016

US$ US$ US$ US$

Employee benefits obligation 43,591 18,461 (4,525) 57,527

Difference between commercial

and fiscal depreciation 16,922 10,028 - 26,950

Deferred tax assets 60,513 28,489 (4,525) 84,477

A reconciliation between the tax expenses and the amounts computed by applying the effective tax rate to profit before tax per consolidated statement of profit or loss and other comprehensive income is as follows:

2017 2016

US$ US$

Profit before tax per consolidated statement

of profit or loss and other comprehensive income 7,870,427 1,359,075

Profit before tax of Subsidiary 4,371,104 599,031

Profit before tax of the Company 3,499,323 760,044

Tax expense at effective tax rates 874,831 190,011

Tax effect of nondeductible expenses (nontaxable income):

Interest expenses 280,924 -

Benefits in kind 33,574 59,826

Community development - 60,394

Interest income already subject to final tax (3,869) (4,790)

Others 15,464 6,013

Total 326,093 121,443

Fiscal loss adjusment from prior year - (92,925)

Tax expense the Company 1,200,924 218,529

Tax expense of Subsidiary 1,105,046 163,121

Total tax expense 2,305,970 381,650


- 33 -

29. EMPLOYEE BENEFITS OBLIGATIONS The Group provides employee benefits for covering all the local permanent employees in accordance with Labor Law No. 13/2003. The number of employees entitled to the benefits are 189 and 186 as of March 31, 2017 and 2016, respectively. The defined benefit plan typically exposes the Group to actuarial risks such as: interest rate risk, longevity risk and salary risk. Interest risk A decrease in the bond interest rate will increase the plan liability.

Longevity risk The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants during their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability. Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

Amounts recognized in the consolidated statement of profit or loss and other comprehensive income with respect to these employee benefits are as follows:

2017 2016

US$ US$

Current service cost 99,015 69,658

Interest costs 18,346 12,559

Effect of employee transfer 7,752 7,516

Past service cost 24,447 -

Foreign exchange difference (775) (2,523)

Components of defined benefit costs

recognised in profit or loss 148,785 87,210

Component of defined benefit costs

recognised in other comprehensive income:

Actuarial (gains) losses 8,691 (18,102)

Total 157,476 69,108

The amounts included in the consolidated statement of financial position arising from the Group’s obligation in respect of the defined benefit plan is as follows:

March 31, March 31,

2017 2016

US$ US$

Present value of unfunded obligation 387,579 230,103


- 34 -

Movements in the present value of employee benefits obligations are as follows:

March 31, March 31,

2017 2016

US$ US$

Opening balance of present value

of unfunded obligation 230,103 174,362

Current service cost 99,015 69,658

Interest cost 18,346 12,559

Benefit paid - (13,367)

Past service cost 24,447 -

Effect of employee transfer 7,752 7,516

Actuarial (gain) loss 8,691 (18,102)

Effect of foreign exchange (775) (2,523)

Ending balance of present value

of unfunded obligation 387,579 230,103

The cost of providing employee benefits is calculated by PT Jasa Aktuaria Praptasentosa Gunajasa, an independent actuary. The actuarial calculation was carried out using the following key assumptions:

March 31, March 31,

2017 2016

Discount rate 7.5% per annum 8.0% per annum

Future salary increment rate 9.0% per annum 9.0% per annum

Mortality rate TMI - 2011 TMI - 2011

Disability rate 1% of TMI 2011 1% of TMI 2011

Resignation rate 5% per annum until age 5% per annum until age

29 then decrease 29 then decrease

linearly into 0% at linearly into 0% at

age 59 age 59

Normal retirement age 60 60

30. NATURE OF RELATIONSHIP AND TRANSACTIONS WITH RELATED PARTIES

Nature of relationship

a. Mercator Limited is the ultimate controlling party of the Group.

b. Oorja (Batua) Pte. Ltd. and PT Indo Karya Perdana are the Company’s stockholders.

c. Related parties with the same ultimate parent with the Company:

PT Mincon Indo Resources (MIR)

PT Oorja Indo KGS (OIKGS)

PT Nuansa Sakti Kencana (NSK)

Mercator International Pte. Ltd.

Oorja Holding Pte. Ltd.

MSC Holdings Pte. Ltd.


- 35 -

Transactions with related parties

a. Sales to PT Oorja Indo KGS in 2017 and 2016 are amounted to nil and US$ 1,678,337, respectively. There is no receivable from these sales as it is paid in advance (Note 17). Advance from OIKGS for the year ended March 31, 2017 and 2016 are amounted to nil and US$ 23,353 (Note 17).

b. Sales to MCS Holdings Pte. Ltd. in 2017 and 2016 are amounted to US$ 28,668,225 and US$ 15,655,780, respectively. Outstanding receivable from these sales are recorded in trade accounts receivable (Note 6).

c. IPK purchased property and equipment from MIR, OIKGS, and NSK with total amount of nil and US$ 228,782 in 2017 and 2016, respectively. Outstanding payable amount as of March 31, 2017 and 2016 are recorded in trade accounts payable as described in Note 14.

d. The Group obtained loan from Oorja Batua Pte. Ltd. as described in Note 18.

31. SIGNIFICANT COMMITMENTS AND AGREEMENTS

a. Based on road usage agreement between IPK and Bakungan Village dated March 10, 2008, which has been amended on June 2, 2008, IPK agreed to take responsibility for the repair and maintenance of 2 kilometers road at Bakungan Village and pay a hauling charge for each Metric Ton of coal that is hauled by IPK and its affiliate through the road. In exchange, IPK has rights to use the 30 kilometers road ex. PT Cita for hauling. The agreement is valid for 30 years up to March 10, 2038.

As of March 31, 2017, only one kilometer of the road is being used by IPK.

b. On July 15, 2010, the Company entered into an agreement with Adriansyah Muchsin (AM)

whereas AM will receive technical consultation fee based on the coal produced by the Company. This agreement is valid until the mining site is fully depleted. Based on Samarinda High Court verdict, AM has been proven guilty as AM has not provided any consultation service to the Company and therefore this agreement has been cancelled. AM has submitted appeal to the Supreme Court and based on Supreme Court verdict No. 2102 K/Pdt/2016 dated November 14, 2016, the appeal has been rejected.

c. On November 14, 2012, the Company signed an agreement with PT Sans Putra Jaya (SPJ) whereas SPJ will receive technical consultation fee from the Company’s coal sales. This agreement is valid until the mining site is fully depleted.

d. On August 13, 2012, the Company signed an agreement with PT Karya Indah Perdana (KIP) whereas KIP will receive technical consultation fee from the Company’s coal sales.

On March 6, 2014, the Company filed a lawsuit against KIP for breach of contract since KIP has not provided any consultancy service to the Company. Based on Samarinda High Court verdict dated February 12, 2015, KIP has been proven guilty and this agreement has been cancelled. KIP has submitted appeal to the Supreme Court and the appeal is still in the process. On February 14, 2017, based on deed No. 7 of Julinar Theodore Helena, SH., M.Kn, notary in Jakarta, the Company and KIP agreed to terminate this lawsuit and there is no financial settlement.

e. On August 13, 2012, the Company signed an agreement with PT Niungriam Gemilang (NG) whereas NG will receive technical consultation fee from the Company’s coal sales. On March 6, 2014, the Company filed a lawsuit against NG for breach of contract since NG has not provided any consultancy service to the Company. Based on Samarinda High Court verdict dated March 25, 2015, NG has been proven guilty and this agreement has been cancelled. NG has submitted appeal to the Supreme Court and the appeal is still in the process. On April 5, 2017, the Company and NG agreed to terminate this lawsuit by an amicable settlement agreement where in NG will revoke the lawsuit to Supreme Court and there is no financial settlement.


- 36 -

f. On February 2, 2015, the Company signed an agreement with PT Multi Sarana Avindo (MSA) to use the hauling road of MSA at agreed price per metric ton of coal hauled. This agreement is valid until August 12, 2023 which is the expiry date of the Company’s IUP.

g. On March 26, 2014, IPK and PT Baramulti Suksessarana Tbk. (BSSR) entered into a port

loading agreement where IPK agreed to provide coal hauling and loading services for BSSR on an agreed price based on coal quantity loaded into barge. BSSR coal in the IPK’s stockpile shall not exceed 50,000 MT. The agreement is valid for three years and can be extended.

On June 8, 2015, this agreement has been amended to extend to 4 years with minimum quantity of 1 million MT per year and to adjust the coal hauling and loading rate based on coal market price every three months.

h. On May 8, 2013, the Company and CV Kutai Kumala Energy (KKE) entered into an agreement where the Company will provide coal hauling service to KKE on an agreed price based on coal quantity loaded into barge. The agreement is valid until KKE’s mining rights expired.

i. On May 12, 2015, IPK and PT Bukit Teluk Mas (BTM) entered into an agreement, where IPK will provide coal hauling and loading service for CV Alam Jaya Indah (AJI) on an agreed price based on coal loaded into barge. AJI has appointed BTM to manage its mine. The agreement is valid as long as AJI is still operating.

j. On July 29, 2015, IPK and PT Rinjani Kartanegara (Rinjani) entered into an agreement, where

the Company shall give permission to Rinjani to utilize its land for Rinjani’s hauling road access, utilizing the partial area of Rinjani‘s IPPKH to operate the mining support services facilities which are stockpile, conveyor and coal loading jetty and the Company will provide hauling service to Rinjani on an agreed price based on coal quantity loaded into barge. The agreement is valid until April 1, 2021.

32. MONETARY ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES As of March 31, 2017 and 2016, the Group’s monetary assets and liabilities in currency other than functional currency are as follows:

Equivalent in Equivalent in

Rp '000 US$ Rp '000 US$

Assets

Cash and cash equivalents 3,849,516 288,981 1,001,634 75,447

Trade accounts receivable 320,170 24,035 2,593,042 195,318

Reclamation deposits 9,387,948 704,748 9,231,785 695,374

Other noncurrent assets 1,252,933 94,057 1,206,085 90,847

Total 1,111,821 1,056,986

Liabilities

Trade accounts payable 28,978,557 2,175,404 28,881,128 2,175,439

Other accounts payable 53,311 4,002 301,551 22,714

Taxes payable 17,948,528 1,347,386 1,333,813 100,468

Accrued expenses 15,731,155 1,180,929 2,571,336 193,683

Total 4,707,721 2,492,304

Net Monetary Liabilities (3,595,900) (1,435,318)

March 31, 2017 March 31, 2016

The conversion rates used by the Group as of June 15, 2017, March 31, 2017 and 2016 are US$ 0.075, US$ 0.075 and US$ 0.075 per Rp 1,000, respectively.


- 37 -

33. CATEGORIES AND CLASSES OF FINANCIAL INSTRUMENTS

March 31, March 31,

2017 2016

US$ US$

LOANS AND RECEIVABLES

Current Financial Assets

Cash in banks 1,647,627 259,841

Time deposits 2,500,000 -

Trade accounts receivable 3,057,642 864,455

Other accounts receivable 64,671 2,078

Noncurrent Financial Assets

Reclamation deposits 704,748 695,374

Other noncurrent assets 94,057 90,847

Total 8,068,745 1,912,595

LIABILITIES AT AMORTIZED COST

Current Financial Liabilities

Trade accounts payable 2,253,053 2,632,139

Other accounts payable 4,002 22,714

Accrued expenses 2,325,235 764,577

Due to a related party 26,442,685 40,565,240

Total 31,024,975 43,984,670

The Group has no financial asset categorized as at Fair Value Through Profit or Loss (FVTPL), held to maturity or available-for-sale nor a financial liability categorized as at FVTPL.

34. FINANCIAL INSTRUMENTS, FINANCIAL RISK AND CAPITAL RISK MANAGEMENT a. Capital Risk Management

The Group manages its capital risk to ensure that it will be able to continue as a going concern, in addition to maximizing the profits of the shareholders through the optimization of the balance of debt and equity. The Group’s capital structure consists of debt (Note 18) offset by cash and cash equivalents (Note 5) and equity shareholders consisting of capital stock (Note 20), additional paid-in capital (Note 21), retained earnings (deficit) and non-controlling interests.

The Board of Directors of the Group periodically reviews the Group’s capital structure. As part of this review, the Board of Directors considers the cost of capital and related risks. The gearing ratio as of March 31, 2017 and 2016 are as follows:

March 31, 2017 March 31, 2016

US$ US$

Due to a related party 26,442,685 40,565,240Cash and cash equivalents (4,226,990) (283,105)

Net debt 22,215,695 40,282,135 Equity 13,358,144 2,302,244

Net debt to equity ratio 166% 1750%


- 38 -

b. Financial Risk Management Objectives and Policies The Group’s overall financial risk management and policies seek to ensure that adequate financial resources are available for operation and development of their business, while managing their exposure to foreign exchange risk, interest risk, credit risk and liquidity risk. i. Foreign currency risk management

The Group is exposed to the effect of foreign currency exchange rate fluctuation mainly because of foreign currency denominated transactions such as purchases of inventories and expenses denominated in foreign currency. The Group manages the foreign currency exposure by matching, as far as possible, receipts and payments in each individual currency. The Group’s net open foreign currency exposure as of reporting date is disclosed in Note 32. Foreign currency sensitivity analysis

The Group is mainly exposed to Indonesian Rupiah for the operation expenses.

The following table details the Group’s sensitivity to a 2.8% and 6.7% increase and decrease in the US$ against Rupiah in March 31, 2017 and 2016, respectively. 2.8% and 6.7% are the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 2.8% and 6.7% change in foreign currency rates as of March 31, 2017 and 2016. A positive number below indicates an increase in profit or equity where the US$ strengthens 2.8% and 6.7% in March 31, 2017 and 2016, respectively, against the relevant currency. For a 2.8% and 6.7% weakening of the US$ against the relevant currency in March 31, 2017 and 2016, there would be a comparable impact on the profit or equity, and the balances below would be negative.

2017 2016

US$ US$

Profit 65,076 97,516

IDR Impact

In management's opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.

ii. Interest rate risk management The Group is exposed to interest rate risk because entities in the Group borrow funds at floating interest rates. There is no interest rate hedging activities in place at March 31, 2017 and 2016. The sensitivity analysis below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.


- 39 -

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group profit for the period ended March 31, 2017 and 2016 would decrease/increase by US$ 94,898 and US$ 173,740, respectively. This is mainly attributable to the Group exposure to interest rates on its variable rate borrowings.

iii. Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligation resulting in a loss to the Group. The Group’s credit risk is primarily attributed to its cash in banks and other accounts receivable. The Group places its bank balances with credit worthy financial institutions. Other accounts receivable are entered with respected and credit worthy third party company. The Group’s exposure and its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the management annually.

The carrying amounts of financial assets recorded in the consolidated financial statements, net of any allowance for losses represents the Group’s exposure to credit risk.

iv. Liquidity risk management

The liquidity risk of the Group arises mainly from funding requirements to pay its liabilities and support its business activities. The Group maintains sufficient funds to finance its ongoing working capital requirements using loan obtained from a related party.

Liquidity and interest risk tables The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Group may be required to pay.

% US$ US$ US$ US$ US$

March 31, 2017

Non-interest bearing

Trade accounts payable - 788,569 1,126,527 337,957 - 2,253,053

Other accounts payable

to third parties - - 4,002 - - 4,002

Accrued expenses - 465,047 1,278,879 581,309 - 2,325,235

Variable interest rate instrument

Due to a related party 7.11 - - 26,780,112 - 26,780,112

1,253,616 2,409,408 27,699,378 - 31,362,402

1-3 months

Less than 1

month

3 months to 1

year

Weighted

average

effective Total1-5 years


- 40 -


March 31, 2016


Trade accounts payable - 995,726 1,341,243 295,170 - 2,632,139

Other accounts payable

to third parties - - 22,714 - - 22,714

Accrued expenses - - 764,577 - - 764,577

Variable interest rate instrument

Due to a related party 5.86 - - 42,601,473 - 42,601,473

995,726 2,128,534 42,896,643 - 46,020,903

1-3 months

Less than 1

month

3 months to 1

year

Weighted

average


The following table details the Group's expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group's liquidity risk management as the liquidity is managed on a net asset and liability basis.


March 31, 2017


Cash on hand - 79,363 - - - 79,363

Trade accounts receivable - 1,890,605 1,167,037 - - 3,057,642

Other accounts receivable - - 64,671 - - 64,671

Reclamation deposits - - - - 704,748 704,748

Other noncurrent assets - - - - 94,057 94,057

Variable interest rate instruments

Cash in banks 0.5 1,648,314 - - - 1,648,314

Fixed interest rate instruments

Time deposit 1.3 - 2,508,125 - - 2,508,125

3,618,282 3,739,833 - 798,805 8,156,920

1-3 months

Less than

1 month

3 months

to 1 year

Weighted

average



March 31, 2016


Cash on hand - 23,264 - - - 23,264

Trade accounts receivable - 791,532 44,623 28,300 - 864,455

Other accounts receivable - - - 2,078 - 2,078

Reclamation deposits - - - - 695,374 695,374

Other noncurrent assets - - - - 90,847 90,847

Variable interest rate instruments

Cash in banks 0.10 - 260,038 - - 260,038

814,796 304,661 30,378 786,221 1,936,056

1-3 months

Less than

1 month

3 months to

1 year

Weighted

average


The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.


- 41 -

c. Fair Value of Financial Instruments

Management believes that the carrying amounts of financial assets and liabilities recorded in the consolidated financial statements approximate their fair values because of their short-term maturities or carry market rates of interest.

35. SUPPLEMENTAL DISCLOSURES ON NONCASH INVESTING ACTIVITIES The Group has investing activity transaction which did not affect cash and cash equivalents and hence not included in the consolidated statement of cash flows with the detail as follows:

2017 2016

US$ US$

Increase in property, plant and equipment

through tax amnesty 9,961 -

36. MANAGEMENT RESPONSIBILITY AND APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS The preparation and fair presentation of the consolidated financial statements on pages 1 to 41 were the responsibilities of the management, and were approved by the Directors and authorized for issue on June 15, 2017.

********

PT KARYA PUTRA BORNEO AND ITS SUBSIDIARY - …mercator.in/investors/FinSub2016-17/PT Karya Putra Borneo.pdf · PT Karya Putra Borneo ... Gde Agung Blok 6.2, Kawasan Mega Kuningan,

Documents