TICE Indonesia Communication NewsFlash - PwC ·  · 2015-06-03TICE Indonesia Communication...

TICE Indonesia

Communication NewsFlashno. 3/2011

Cloud Computing

In this issue

• CloudComputing

• Proposedoverhaulof accountingforleases- asignificantissueforthe telecommunications industry

•TaxUpdate

• TechnologyNeutralSpectrumLicensing

PwCIndonesia CommunicationNewsFlash1

Cloud computing is one of the latest technology trends to capture the attention of businesses, consumers, and investors alike.

One of the choices for the future

Cloud computing - a hot topic of the future

ITpractitionersbelievethatcloudcomputingoffersmanybenefitstoanorganisationandevenitmaysignificantlychangethewaycompanydeliversservicesandopensuproomsforinnovationandcostssaving.Yes,itispartlytrue,ascloudcomputingdeliverscomputingasaserviceratherthanaproductoverunlimitednetworks(typicallytheinternet).Asaresult,itprovidescomputation,software,dataaccessandstorageservicesthatdonotrequireend-userknowledgeofthephysicallocationandconfigurationofthesystemthatdeliverstheservices.Withthismodel,cloudcomputingisapromisingmethodtoincreaseflexibility,responsivenessandcostsavingsofITservicedeliverythroughbetterutilisationanddecreasedmaintenance.Intheend,anorganisationmayhaveabetterreturnontechnologyinvestments.The

2 CommunicationNewsFlash PwCIndonesia

potentialbenefitsthatcloudcomputingcanbringtothebusinesses,consumersandinvestorsareperceivedtobehuge.AsurveybyPwCpredictsthatby2014,thetypicalITinfrastructurefortoday’scustomersofITOserviceswillrelyoncloudcomputingformorethanathirdoftheirITresourcebase,includingthepubliccloudasasmallpartofthat.

What is cloud computing anyway?

Cloudcomputing,accordingtomanypeople,isanothernameoranextensionofcomputingvirtualisation,atechnologyintroducedinthemainframecomputingera.It’ssomewhattrue:virtualisationisoneofthekeyunderlyingtechnologiesthatmakecloudcomputingpossible.VirtualisationconsistsofasetoftechnologiesthatenablesystemsandapplicationstoshareITresourcessuchasservers,storage,andnetworking.Itmasksthecomplexityoftheresourcesbeingsharedandtheirlocation,whicheffectivelysimplifiestheuseoftheITenvironment.Virtualisationtechnologyreducessignificantlythecoststoacquireservers,storage,network,desktopsorapplicationswhentheyareproperlyadopted.Therearethreetypicalmodelsofcloudcomputing:public, private and hybrid clouds.Eachgivesdifferentbenefitsandchallengestoanorganisation.

Privatecloudcomputingalreadystartedinthemainframeera,asthemainframedatacenterwastheoriginalinternalcloudwithintheenterprise.Italsowastheoriginalvirtualisedcomputingplatform.

Thatisprobablywhythemainframedatacenterveteranswonderwhytherearesuchhighlevelsofinterestinvirtualisation,softwareasaservice(SaaS)andinfrastructureasaservice(IaaS),orcloudcomputing,asitisnotanewthing.Certainly,thetechnologiesinvolvedtodayhaveevolvedconsiderably,butthesedatacenterveteransarecorrectfromahistoricalperspective.

Todaysomemightdescribetheenterprisedatacenter,theclassicglasshouse,asaprivatecloudsimplybecauseitisasingleresourcedeliveringITasservicesoverthenetworktoapplicationsandtousersbehindthecorporatefirewall.

Thisold-styleprivatecloudactuallyintroducedhugeamountsofunusedcapacityandincaseofanyproblems,ariskytransitionfromonemachinetotheotherduringwhichapplicationswouldbeunavailableforhoursordays. Abetterdefinitionofprivatecloudcomputingistheacquisition,provisioning,andmanagementofdatacenterresourcesinahyperefficientandagileway.

TheprivateclouddefinitionaboveemulatestheleadingpracticesofpubliccloudserviceproviderssuchasAmazon.com,Google,andMicrosoftwhileaddingtheneededsecurityandcontrolsappropriatetospecificenterprisesneeds.

ThepubliccloudexiststodayandmanyorganisationsalreadyuseitforSaaSsolutionsortoaugmenttheirexistingITcapabilitiesthroughIaaSofferings.Cloudcomputing,privateorpublic,producesahighlydynamictechnologyenvironmentthatcandrivemultiplevaluepropositions.

TheseincludegreenIT,continuousapplicationavailability,andinstantenvironmentscale-upandscale-downinaconsumption-basedcostmodel.

Private clouds

Public clouds

Three models: Private, Public or Hybrid Cloud Computing

PwCIndonesia CommunicationNewsFlash 3

Byextendingtheprivatecloudtoaccesspubliccloudresources,usuallyITinfrastructureresources,theorganisationcreatesahybridcloud,whichcombinesbothprivateandpubliccloudresources.Thiswillprovideplentyroomsforinnovativeservicesfromanorganisation.

Telcocompaniesareinaverygoodpositiontopromotecloudcomputingservices,andevenextendtheirbusiness,withthenetworkandinfrastructurecoveragetheyown.Withthesignificantexpansionoftheneedofdatacommunicationanddatastoragebythebusiness,Telcocompanieswillhaveadvantagesbyofferingprivate,publicorhybridcloudcomputingbasedservicestocompaniesinvariousindustries.

Hybrid clouds

What changes you need to consider?

Cloudcomputingismorethananadvanceintechnology.Itrepresentstransformationforyourentireorganisation—people,processes,andsystems,regardlessoftheindustry.

Finance —Identifyingcloudservicesandanalysingaccountingmodelswillhelpyourorganisationdeterminehowtoproceedmostefficientlyandeffectivelywithactivitiessuchasresearchanddevelopmentandrevenuerecognition.

Internal audit —Inordertoaccommodatethemovetocloudcomputing,cloudserviceproviderswillneedtomodify,upgrade,orreplacesystemstoprocess,measure,andcontroluse.Thiswillalsobecriticalforbilling.ProvidersshouldhavetherightSLAsinplace,andaprocesstomonitorthoseSLAs.Buyersofcloudservicesmustgivethemselvesthesamecontrolsandmonitoringenvironmentinthecloudthattheydooninternalnetworksandservers.Thisismuchmorechallenging,asyourorganisationnolongercontrolsthehardware.Methodsofapplicationsmanagementmaychangesignificantly.

Tax —Ifyou’rebuyingorsellingcloudcomputingservices,itiscriticaltodeterminewhatyou’rebuyingorselling.Youmaybeleasingequipment,makingservicepayments,orpayingalicenseforusingsoftware—thesedistinctionsareimportantandcanhaveanimpactonyourcompany’staxexposures.Currenttaxlawdoesnotnecessarilyreflecttherealitiesofcloudcomputing.Cloudcomputingtransactionsaren’tquiteleasesandaren’tquiteservices,buttaxlawrequiresthemtobeclassifiedinoneofthesetwocategories.Eventually,taxregulationswillbeupdatedandclarified.Now,thereisn’tenoughconsensus.

Risk and compliance —Cloudcomputingrepresentsarisk,asitmovesdataandinformationintothehandsofathird-partyproviderforstorage,processing,orsupport.Buyersofcloudserviceswillneedtosetthecriteriafortheevaluationofcloudcomputingproviders;whereasproviderswillneedtoconsiderwhichcloudservicestoprovide.Then,yourorganisationwillneedtobeabletoexplainthenextstepsthatarerequiredinordertomitigatetherisksofmovingintoacloudcomputingenvironment.

Marketing and sales —Newservicesandproductsleadtonewsalesmodelsandcustomerinterfaces.Torealizethefullpotentialofcloudcomputing,yourorganisationneedstounderstandthevalueoftheseproductsandservices,andthenpricethemcorrectly.

Managing the use of cloud computing technology

Greater agility, accelerate innovation, flexibility

Cloudcomputingcanhelpbusinessesmeetdemandsforgreateragilityasitischangingtheabilityforcompaniestodeliversolutionsatthenewspeedofbusiness.

Cloudcomputingsolutionshavethepotentialtoaccelerateinnovationandtime-to-market,enhancecustomerengagement,andimproveconnectionsacrossthenetworkofsuppliers,timezones,andcultures.

CloudcomputingcandeliverlowerITcostsandincreasedefficiencies,anditalsoprovidespowerfulnewopportunitiestodrivebusinessgrowth.Cloudcomputingallowscompaniestocreatenewandbroaderlinesofbusinessbypartneringwithexternalproviders.

It is critical to involve the CIO at the early stage

CIOsareuniquelyqualifiedtoleadacloudstrategy,thankstotheirintricateknowledgeofIT.Whilein-depthunderstandingoftechnologyiscritical,nolessimportantistheabilitytoarticulatethebusinessimpactsandopportunitiesofcloudcomputingtotheC-suite.

CIOsshouldprudentlyevaluateallITfunctionsascandidatesforcloudcomputingandbepreparedtoidentifynewbusinessopportunitiesthatwilldeliverthebestreturnoninvestment.

CIOscanalsoproactivelydesigngovernancemechanismstoevaluate,procure,implement,andconsumecloudservices.

AdoptionofclouddeliverymodelscandisruptIToperatingmodels,andtheCIOmustbepreparedtomanagetheimpactontheITworkforce.

4 CommunicationNewsFlash PwCIndonesia

Vendor lock-in — Theviabilityandcapabilitiesofsmallandstartupcloudvendorscouldbeaconcernforlongtermcontinuityofservice.Enterprisesthatareusingproprietaryvendortechnologymayincurheavycostsiftheyaretomovetoanothercloudplatform.

Regulation—ManycountriesdemandonshoreITprocessingandstorage.Oneoftheobjectiveisforaninformationsecurityprotection.Asthecloudcomputingreducestheusers’knowledgeoftheITprocessinglocation,theinformationsecurityregulationinsomecountries,ontheother,protectstheinformationprocessedorstoredoutsidetheirjurisdiction.

The chief executives can set the tone for the cloud strategies

CEO

CloudcomputingsignifiesaneraofcomputingwhereflexibilityinITdrivesbusinessagilityandahigherlevelofinnovationandcustomerengagement

Criticalquestionstoconsider:• Howcanyoucommunicate

thetransformationalpotentialofcloudcomputingtoseniormanagementandtheboard?

• WhatbusinessvaluedoescloudbringbeyondtheITbenefitsandhowdoyouidentifyandgainthosebenefits?

• Howcanyouexploitstrategicopportunitieswhilemanagingrisktothebusiness(finance,tax,operationalandIT)?

CAE

Chief Audit Executives needtotakeaproactiveroleengagingtheC-suiteandbusinessleaderstounderstandwhatdataandapplicationsmaybemovedtothecloud.

Theythenshouldinvestigatespecificrisksandcontrolsfornear-termcloudadoption.Theyneedtore-evaluatetheirannualriskassessment,auditscope,andresourcestosupportitscompany’scloudstrategy.

CIO

AnITenvironmentbuiltwithcloudprinciples —on-demand,elasticandusage-basedpricing —deliversvaluetotheendcustomerbylinkingtheendcustomerexperiencetotheenablinglayersoftheITstackfrominfrastructuretoapplications.

Criticalquestionstoconsider:• Whichofthestrategic

imperativescancloudsolutionshelprightaway?

• Whatistheroadmapthatcreatesincrementalbenefitsonthewaytoadoptingcloudcomputing?

• HowcanITbetteralignwithproductdevelopmenttosupportyourchangingbusinessmodel?

• HowdoesyourtalentstrategyneedtochangetosupportanEvergreenITinfrastructure?

CFO

Cloudcomputingalsoshiftsspendfromcapitalexpendituretooperational,allowingenterprisestomakeinvestmentsclosertothetimeofactualreturns.

Criticalquestionstoconsider:• Howdoyoumanagethe

unpredictabilityofcostsinapayasyougomodel?

• Whataretheimplicationsofmovingtoaservicemodelfromanaccountingandtaxperspective?

• HowcanITcostsreflecttheneedsofindividualbusinessunits?

PwCIndonesia CommunicationNewsFlash 5

Identifying the right path for your company: Three scenarios

Whenitcomestotheenterpriseviewofthecloudcomputingopportunitytoday,PwChasdeterminedthatcompaniesfallonacontinuumfromnotconsideringcloudcomputingatalltofullyleveragingcloudcomputing.Forconceptualsimplification,however,PwChasdefinedthreecommonpathsthatreflectwheremostorganisationsaretoday.Seniorexecutivesshouldidentifywhichcloudpaththeirorganisationappearstobeon,determinewhichcloudpathismostappropriateforthefuture,determineifthereisasignificantgap,andsetastrategyforclosingthegap.

Path 1: Have strategy and pieces but need to connect the dots

• Starting point: Havesomecloudcomponentsdeployedandhaveastrategy

• Desired outcome: Transitiontoaninternalcloudenvironmentwiththeabilitytoconnecttotheexternalcloudasdesired

• Likely gaps: Confusinggovernance;conflictingstandards

• Obstacles/challenges: Fillingintheremainingcloudcomponentsinternally,connectinglegacyback-endsystems,andportingapplicationstotheinternalcloud

• Next steps: Continuetoaddcloudcomponents,simplifygovernance,andenforceasinglesetofstandards

Path 2: Have virtualisation and some cloud components but lack vision and strategy

• Starting point: Havedeployedmainlyvirtualisationcomponentsandafewcloudcomponents,andareimplementingpointsolutions

• Desired outcome: Transitiontoafullyvirtualizedenvironmentcapableoftransitioningtoaninternalcloudenvironment

• Likely gaps: Lackofvision;nocohesivestrategyforcloudcomputing

• Obstacles/challenges: EducatingbothITandmanagementontheopportunitiesandvalueofcloudcomputing;lackoftechnicalandbusinessleadershiponthisissue

• Next steps:Identifyamanagementleader,painttheorganisation’svisionforvirtualisationandcloud,andsecurebuy-infrommanagementandIT

Path 3—Have the interest and vision but unsure of getting started

• Starting point: Haveinterestandthebeginningsofacloudvision,butarenotsurewheretheystandinregardtovirtualisation,ITautomation,andcloudcomputing

• Desired outcome: TransitiontoanefficientITenvironmentthatusesvirtualisation,SOA,andcloudcomputingtoachieveanagileorganisation

• Likely gaps: Benchmarkingneededtoidentifywheretheyareandhowtoproceed

• Obstacles/challenges: Developingaworkablestrategyandbeginninganorderlyimplementationofcloudcomponents

• Next steps: DevelopabusinessandITstrategyandinitiatetheimplementationbasedontheresultsofbenchmarking

6CommunicationNewsFlash PwCIndonesia

Cloudcomputingcertainlygivespromisesandhopesincreatingnewmarketopportunitiesandmoreinnovativewaysofdeliveringservicesandnewbusinesses.InIndonesia,mobileoperatorswilldefinitelyplayakeyroleindeliveringthecloudcomputinginfrastructuresandservices,consideringtheextensivenetworkcoverage,infrastructuresandnumbersofsubscriberstheyhave.Although,someissuessuchasincreasingbandwidthcapacity,networkanddatastorage,informationanddatasecurity,andregulations,willbecomethefundamentalchallengesinthefuture.Theregulatorsontheotherhands,playsanimportantroletosetthetoneandbecomethe“driver”inembracingthecloudcomputingtechnology,bothinpublicandprivatesectors.

Telecommunications

Proposed overhaul of accounting for leases - a significant issue for the telecommunications industry

Application:Afinalstandardisexpectedinthefirsthalfof2012. The application date is yet to be determined.

What is the issue?

On17August2010theInternationalAccountingStandardsBoardandFinancialAccountingStandardsBoard(the“boards”)issuedtheExposureDraftLeases("ED"). Theproposalsdescribeanaccountingmodelthatwouldsignificantlytransformleaseaccounting.

TheEDproposesanewmodelforlesseeaccountingwherebyalessee’srightsandobligationsunderexistingandnewleaseswouldberecognisedonthebalancesheet.

Theproposalrequireslesseesandlessorstoestimatetheleasetermandcontingentpaymentsatthebeginningoftheleaseandre-assesstheestimatesthroughouttheleaseterm.Thisactivitywillrequiremoreeffortandjudgementthanunderexistingstandards.

The boards received over 770 comment letters in response to their ED (keythemesarediscussedinthefollowingpages).Thereisindicationthattheboardsarewillingtoaddresssomeoftheissuesraisedbyconstituents;however,formaldecisionsareyettobemade.

TheboardsareaimingtoissuethefinalstandardinH12012.Are-exposureorreviewdraftisexpectedinQ32011.

ThediscussioninthispaperisintendedforcompanieswhohaveadoptedfullIFRSissuedbytheIASB.Currently,IndonesianFinancialAccountingStandard(IFAS)no.30 (revised2007)– Leases,wasbasedon IAS19as at1 January2009.

Note. In this documentwe consider the proposed changes to accounting forleasesintheED.Anyconclusionsnotedherearesubjecttofurtherinterpretationandassessmentbasedonthefinalstandard.TalktoyourusualPwCcontactforthelatestupdates.

PwCIndonesia CommunicationNewsFlash 7

Why is this significant for the telecommunications industry?

Consideringthediversityoftransactionsinthetelecommunicationsindustry,mostoperatorsfindthemselvesinleasecontractswheretheyarebothlessorsandlessees.Typicalagreementsinwhichtelecomcompaniesactasalesseeincludeleasesofland(forBaseTransceiverStation("BTS")sites),telecommunicationinfrastructure,officebuildingleases,storeleases,equipmentleases,vehiclesandotherday-to-dayoperationalassets.Therearealsoamultitudeofotheragreementsthatcouldqualifyasleases,dependingonwhethertheyfallwithinthescopeoftheED.Suchleasesincludecapacitycontracts,wayleavesandr ights ofaccess,satellitebroadcastingcontractsandIToutsourcingagreements.

Ifadopted,theproposalswillhavepervasivebusinessandaccountingimpacts.Inparticular,theimpactonfinancialreportingcouldbesubstantialinthetelecommunicationsindustry.Forexample:

• expenserecognitionpatternswillchange.Whilecashpaymentsremainunchanged,theprofitorlosswillhaveafront-loadingofexpense.Cashpaymentsversusexpenserecognitionwillfurtherdiverge,particularlyforlongtermleasessuchasleasesrelatedtoBTSsites.Whilecashpaymentsremainunchanged,theprofitorlosswillhaveafront-loadingofexpensewithhigherexpensesrecordedinearlieryears.Management’sjudgementconcerningrenewaloptionsandcontingentrents,suchasleasepaymentsbasedoncapacityusage,mayproducesignificantincomestatementvolatility;

• mostleaseswillgeneratealiabilityforlessees.Analystsandcreditagenciesareunderestimatingthesignificanceoftheliabilitywhenaddingback"debt-like"itemsforoperatingleases.Amaterialleaseliabilitycouldbeaddedtothebalancesheetforsignificant'capitalitemssuchasBTSsitesaswellasofficesandtelecomserviceproviderstores.Assuch,theliabilitiesmaybesubstantialandhaveasignificantimpactonthedebttoequityratiosoftelecommunicationscompanies,whichinturnmayhaveanimpactondebtcovenants;

• decisionpointsanddataneedswillchange.Structuringconsiderationwillchangetofocusonliabilityandvolatilityreductionasopposedtoobtainingoperatingleasetreatment.Dataneedsforongoingreportingwillchangesignificantly.BonusplansandperformancemeasuresunderEBITDAinthetelecommunicationsindustrywillneedtobereconsidered.Insomeinstances,companiesareconsideringanewmeasurementbasedonEBITDAR(earningsbeforeinteresttax,depreciationamortisationandrentalcosts);

• lease-versus-buydecisionsshouldberevisited.Withoutthedesiredaccountingtreatmentforoperatingleases,managementmayprefertopurchaseassetsratherthanenterintoleasearrangements,inparticularforleasesofsmallticketitemssuchascomputersorofficeequipment.Lessorsmaywanttoconsiderhowtheseproposalsmightaffecttheirbusinessstrategies;

• ITsystemsandinternalprocessesmayneedupdating.Additionally,currentleasingsoftwareandsystemswillbeincapableofhandlingthenewrequirementsnecessitatingupgradesandenhancementstothesourcecode.

8 CommunicationNewsFlash PwCIndonesia

What are the overarching proposals?

Thekeyelementsoftheproposalsandtheireffectonfinancialstatementsareasfollows.

Lessee accounting

Theproposaleffectivelyeliminatesoff-balancesheetoroperatingleaseaccountingformostleases.Mostassetscurrentlyleasedunderoperatingleaseswouldbebroughtontothebalancesheet.Theboardiscurrentlyconsideringifleasesofapproximately12monthsorlessshouldcontinuebeingaccountedforasoperatingleases.Entitiesintheindustryhaveassumedthatleaseswillapplyaccountingsimilartothecurrentguidanceforfinanceleases;however,themeasurementoftheright-of-useassetandleaseliabilityissignificantlydifferenttoexistingfinanceleaseaccounting.Also,thebalancesheetimpacthasreceivedthemostpress,buttherearesignificantchangesfromoperatingleasestothetinningoftherecognitionofexpensesintheincomestatement.

Thesignificantimpactsoftheproposalsinclude:

• aright-of-useasset(representingtherighttousetheleaseditemfortheleaseterm)andanobligation(representingtheobligationtopayrentals)wouldberecognisedandcarriedatamortisedcost,basedonthepresentvalueofpaymentsoverthetermofthelease;

PwCIndonesia CommunicationNewsFlash 9

• followingre-deliberations,theleasetermwouldincludeoptionalrenewalperiodsthathavea`significanteconomicincentive'.Duringre-deliberations,theboardstentativelydecidedthatextensionoptionsarethosethatprovide‘asignificanteconomicincentive’foranentitytoexerciseanoption.Inpractice,thismeansthatleasetermsmaybesimilartothosedeterminedundertheexistingstandards.However,determiningwhetherarenewaloptionisexpectedtobeexercisedisnotdependentonmanagementintentorpastpractice;ratheritisbasedonwhetherasignificanteconomicincentiveexistsatthetimeoftheassessment;

• undertheED,theuseofan`expectedoutcome’approachtoestimateleasepaymentswasproposedinordertomeasuretheinitialvalueoftheleaseassetandliability.Thisapproachwouldincludeconsiderationofcertaincontingentamounts,suchasrentslinkedtovariablessuchastheConsumerPriceIndex("CPI").However,inrecentre-deliberations,theboardshavetentativelydecidedthattheestimateshouldonlyincludecontingenciesthatare:i)basedonarateorindex;ii)are'disguised'asafixedleasepayment;andiii)haveresidualvalueguaranteeswhichareexpectedtobepaid.ThiswouldmeanthatestimatedleasepaymentswillnotbeassubjecttojudgementasoriginallyproposedintheED;

• undertheED,leaserenewalsandcontingentrentswouldneedtobecontinuallyreassessedbyentities,andtherelatedestimatesadjustedasfactsandcircumstanceschange.However,inrecentre-deliberations,theboardshavedecidedthatreassessmentoftheleasetermshouldbeperformedonlyundercertaincircumstances.Thiswouldsubstantiallyreducethetimeentitieswouldneedtoinvestinreviewingestimatesandupdatingcorrelatingnumbers;itwasacommonissueraisedbyentitiesinresponsetotheproposals;

• theboardshadtentativelydecidedthatleaseswouldbeallowedto(butnotrequired)toaccountforshort-termleasessimilartocurrentoperatingleaseaccounting.Howeverthereisclearindicationthatboardmembersareuncomfortablewiththisearlierdecisionandwouldprefermaterialitytobeusedtodeterminewhetheraleaseisrecognisedbyalessee.Adecisionisyettobemade;and

• atentativedecisionhasbeenmadethat,wherethereisamodificationtoaleasecontract,themodifiedleaseshouldbeaccountedforasanewlease.Wherethereisachangeincircumstancesthatwouldaffecttheassessmentofwhetheracontractisorcontainsalease,bothlesseeandlessorshouldperformareassessment.Ifthischangestheconclusionastowhetheracontractdoesordoesnotcontainalease,theleaseshouldeitherberecognisedorderecognisedaccordingly.

10 CommunicationNewsFlash PwCIndonesia

Presentation and disclosure

Duetothesignificantlyexpandeduseofestimatesandjudgementsintheproposedleasestandard,disclosurerequirementswillgowellbeyondthoserequiredunderthecurrentleasingstandard.Thismayinclude:quantitativeandqualitativefinancialinformationthatidentifiesandexplainstheamountsrecognisedinfinancialstatementsarisingfromleasecontractsandadescriptionofhowleasesmayaffecttheamount,timing;anduncertaintyoftheentity’sfuturecashflows.

Specificdisclosureswouldalsoberequired.Forexample,adescriptionofthenatureofanentity’sleasingarrangements,theexistenceandtermsofoptionalrenewalperiodsandcontingentrentals,andinformationaboutassumptionsandjudgements.Inaddition,anyrestrictionsimposedbyleasearrangements,suchasdividends,additionaldebt,andfurtherleasingshouldalsobedisclosed.

Thefollowingdisclosureswouldalsoberequiredundertheproposals.• Informationabouttheprincipaltermsofanyleasethathasnotyet

commencediftheleasecreatessignificantrightsandobligations(suchassignificantleasesoflandwithaviewtoerectBTSsites).

• Areconciliationbetweentheopeningandclosingbalancesofright-of-useassetsandobligationstopayrentals,disaggregatedbyclassofunderlyingasset.

• Anarrativedisclosureofsignificantassumptionsandjudgementsrelatingtorenewaloptions,contingentcashflows,andthediscountrateused.Forexample,therenewaloptionsincludedinmanyleasesoflandforBTSsites.Inthepastsuchcontractsmayhavegiventheoperatoranoptiontorenewindefinitely.Theassumptionsusedtodeterminetheleasetermarecriticalandwouldneedtobedisclosed.

• Amaturityanalysisofthegrossobligationtopayrentalsshowing:(a)undiscountedcashflowsonanannualbasisforthefirstfiveyearsandatotaloftheamountsfortheremainingyears;and(b)amountsattributabletotheminimumamountsspecifiedintheleaseandtheamountsrecognisedinthebalancesheet.

• Additionaldisclosureswouldapplyif:(a)thesimplifiedoptionforshort-termleasesiselected;(b)significantsubleasesexist;or(c)thereisasale-leasebacktransaction(whichisoftenthecasewhereSRSsharingtakesplace).

PwCIndonesia CommunicationNewsFlash 11

How would typical terms & conditions in the telecommunications industry be affected?

Terms Example Existing accounting New accounting Potential impact on the telecommunication industry

CPIescalations Inmanycasescertainassetsusedbytelecomsareleasedratherthanowned.Thesecontractshavebuilt-inrentescalationclausesforeachanniversarydatebasedonthechangeinthepublishedCPI.

Treatedascontingentrentwhichisnotincludedin'minimumleasepayments'usedforstraightlinerentpurposes;rathertheexpenseisrecognisedineachannualperiodbasedonactualincreaseinthatperiod.

ThenewstandardwouldrequirethelesseetoincludeCPIescalationsusingthespotratetomeasureitsleaseliabilityundertheseprovisionsforwhateverleasetermisutilised(includingpotentialextensionoptions)andincludetheminthecalculations.

ManagementwouldneedtodeterminetheCPIescalationsbasedonCPIcurvesobtainedfromthemarket.Alternativelymanagementwillneedtoapplyjudgementsandestimates.Thismayinfutureprecludetheuseofsuchclauses.

Optionallongtermrenewalperiods(optionstoextend)

Atelecomcompanyentersintoaleaseoflandfortenyearsforthepurposesoferectinga$'I'Ssite.Theprovisionsofthecontractstatethattheleasecanberenewedforanadditional20yearsattheendofthecurrenttenyearlease.

Thecurrentleasemodelwouldincludeonlythoseoptionalrenewalperiodsthatare‘reasonablycertain’tobeexercised.Theleaseoflandmaybeconsideredanoperatingleaseandthus"straightlining"wouldresultinaconstantperiodicexpenseovertheleaseterm.

Thenewleasingmodelwouldrequiretheleasetermtoincludetheoptionrenewalperiodswherethereisa‘significanteconomicincentive’.Thisrequirementisadifferenthurdlethan‘reasonablecertainty'andcouldfeasiblyresultindifferenttermsbeingincludedintheleaseterm.Considerationof'significanteconomicincentives’mayincludefactorssuchasrentpaymentsinsubsequenttermsorthecosttoreplacetheleasedasset.

Telecomcompaniessignificantlyaffectedbythesechangesshouldconsiderthetermsofarenewaloption.Managementmayinfuturenotinclude‘optionforrenew’clausesinordertoavoidtheaccountingthereof.

Capacity-usagerent

Atelecomcompanyentersintoacapacitycontractthatmeetsthedefinitionofalease.Asalesseetothearrangement,thetelecomcompanywillpayafixedfeepermonthforaspecifiedlevelofcapacity.Shouldthisbeexceeded,anadditionalchargewillbeleviedonaper-unit-of-capacitybasis.

Theseleasepaymentsaretreatedascontingentrentalarrangementswhicharenotincludedin‘minimumleasepayments’usedforstraight-linerentpurposes;rather,theexpenseisrecognisedbasedonactualcapacitywhenitbecomesprobablethatcapacityusagewillexceedthespecifiedlevelofcapacity.

Theboardsneedtofinalisethe'definitionofalease'inthenewleasemodel.Thereisconsiderationwhetheraleasefora‘non-physicallydistinct’portionofassets(suchascapacityinafibreopticcable)wouldmeetthedefinitionofalease.Ifthearrangementmeetsthedefinitionofalease,theboardstentativelydecidedthatvariablerentsbasedonperformanceorusageareexcludedfromtheestimateofleasepayments.Asaresult,percentagerentmaycontinuetobetreatedthesameasundertheexistingrules.

Managementmayneedtoconsiderthespecificityoftheassetbeingleased.Onlyspecifiedassetsareinthescopeofthenewleasemodel.Thecapacityusagerentisnotexpectedtohaveanimpactonbusinessstrategy.

Debtcovenan Atelecomcompanyhasdebtcovenantswhichareclosetobeingexceeded.Thetelecomcompanyentersintoleasesforthemajorityofitsassetsandtheseareclassifiedasoperatingleases.

Noadditionalliabilitieswillberaisedastheseleasesareclassifiedasoperatingleases.

Liabilitieswouldneedtoberaisedforallleasesregardlessofclassification.Thedebtcovenantswillbeexceededasthesewerenotpreviouslyexcludedfromdeterminingthedebtcovenants.

Managementmayneedtoconsiderdebtcovenantsandleasetermswhennegotiatingwithbankstoobtainadditionalcredit.Theimplicationswillalsoneedtobeconsideredoncurrentfinancearrangements.

Foreignexchange

AtelecomhasafunctionalcurrencyofRussianRubleandsignsaleasecontractinEurosforanofficeinMoscow.

Currently,theEuroiscloselyrelatedtoaRussiancompanyasthecurrencyiscommonlyusedinRussia.Noembeddedderivativewouldberequired.

TheliabilitywillneedtobedeterminedinEurosandtranslatedeveryreportingperiodintoRussianRuble.Thiswillintroducesignificantvolatilityintotheprofitandlossduetoforeignexchangerisk.

Leaseagreementsshouldbeenteredintothefunctionalcurrencyoftheentitytoavoidvolatilityintheprofitandloss.

12 CommunicationNewsFlash PwCIndonesia

How will this affect the financial metrics of telecommunication companies?

PwChasperformedabenchmarkstudytoassesstheimpactoftheleasingproposalsonthefinancialstatementsandkeyfinancialratiosofasampleof125listedtelecommunicationcompaniesfrom32countries.

Thestudyidentifiestheminimumimpactofcapitalisingtheoperatingleasecommitmentsdisclosedinthepublishedfinancialstatements.Inviewoftheproposedinclusionoflikelyleaserenewals,contingentrentalsandresidualvalueobligations,theeventualimpactmaybemuchgreaterandmayalsohaveanimpactontheamountscurrentlyrecognisedforfinanceleases.Inaddition,thestudytakesnoaccountofanytransitionalreliefsthatwillbeavailableonfirst-timeadoptionofthenewstandard.Nevertheless,itprovidesanindicationoftheimpactthattheproposedleaseaccountingmodelmayhave.

TheeffectsonfinancialmetricscaneasilybeseenwhenconsideringEBITDA,akeyperformancemeasurewithinthetelecommunicationsindustry.EBITDAisexpectedtoincreaseduetothereplacementoftheleaseexpensebyamortisationandinterest.Outofthetelecommunicationcompaniessurveyed,morethanathirdareexpectedtoseeanincreaseinEBITDAofmorethan10%(refertoChart1).

Ifweconsiderthedebttoequityratio,ourstudyconcludesthattheratioisexpectedtoincreasebymorethan10%formorethanhalfofthetelecommunicationcompanies,andbymorethan25%fornearlyaquarterofthosesurveyed(seeChart2).

Thecombinedeffectofincreasingdebtandinterestexpense,combinedwithanincreaseinEBITDAonatelecommunicationcompany'sEBITDA/interestratio,isuncertain.For28%ofthecompaniesinourstudy,thecombinedimpactispositive.For45%,however,theimpactismorethan5%negative,for18%ofthesetheimpactismorethan20%(seeChart3).

Chart 1RelativeincreaseinEBITDA

Chart 2Relativeincreaseindebt/equityratio

Chart 3ImpactonEBITDA/Interestcoverage

PwCIndonesia CommunicationNewsFlash13

14 TICENewsFlash PwCIndonesia

Staying relevant in a mobile data world

The timing of issuing VAT invoices – new guidance

Recently,theDirectorGeneralofTaxes(DGT)finallyissuedguidanceregardingVATinvoicesintheformofCircularLetterNo.SE-50/PJ/2011(SE-50),whichprovidesclarificationandcertaintyonthetimesatwhichValueAddedTax(VAT)invoicesmustbeissued.

Ingeneral,VATcollectionisbasedontheaccrualprinciple,wherebyVATmustbecollectedatthetimeofdeliveryoftaxablegoodsorservices.Thetermdelivery,inthiscase,isdefinedasthetimewhenriskandownershipofgoodshavebeentransferredorwhenincomefromaservicedeliverycanbereliablyestimatedormeasured.Intheaccrualsystem,incomeorreceivablesareacknowledgedwhenatransactiontakesplace,regardlessofwhetherthetransactionhasbeenpaidforornot.Therecognitionofrevenueorreceivablesisindicatedbytheissueofacommercialinvoice,whichisasourcedocumentforthisrecognitionandabasisforrecordingit.

SE-50specificallylaiddownexamplesofthetimeofdeliveryforeachtypeoftaxablegoodsandservices,i.e.thedeliveryofmovableandimmovabletangiblegoods,thedeliveryofintangiblegoodsandthedeliveryoftaxableservices.ExamplesofthetimeatwhichacombinedVATinvoicemustbeissuedinrelationtodeliveriesmadetothesamerecipientduringonecalendarmontharealsoprovidedinthisregulation,assetoutbelow.

No. Period of usage/delivery oftaxable services

Period ofrevenuerecognition

Timing ofrevenuerecognition

Issue ofcommercialinvoice

Deadline toissue VATinvoice

1a 1 – 30 June 2011 1 – 30 June 2011 June2011 30 June 2011 30 June 2011

1b 1 – 30 June 2011 1 – 30 June 2011 June 2011 5 July 2011 5 July 2011

1c 1 – 30 June 2011 1 – 30 June 2011 June2011 31 July 2011 31 July 2011

2 26 May – 25 June 2011 26 May – 25 June 2011 June2011 6 July 2011 6 July 2011

3 16 May – 15 June 2011 16 May – 15 June 2011 May 2011 20 June 2011 20 June 2011

4 16 May – 15 June 2011 16 May – 15 June 2011 June 2011 20 June 2011 20 June 2011

5 16 May – 15 June 201116 – 31 May 2011 May 2011 31 May 2011 31 May 2011

1 – 15 June 2011 June 2011 15 June 2011 15 June 2011

AVATinvoicedoesnothavetobeseparatefromthecommercialinvoice.TheVATinvoicemaybeintheformofacommercialinvoiceoraparticulardocumentdesignatedasaVATinvoicebytheDGT.

SE-50alsoconfirmsthataVATinvoiceshallbeissuedatthetimeof:a. thereceiptofatermpaymentofadeliveryofpartialwork,inrelation

tothedeliveryoftaxablegoodsorservicesthatarefinishedwithinaparticularperiod;and

b. whenataxableentrepreneursendsaninvoice,inrelationtothedeliveryoftaxablegoodsorservicestoagovernmenttreasuryasVATCollector.

14CommunicationNewsFlash PwCIndonesia

TaxUpdate

PwCIndonesia CommunicationNewsFlash 15

BeforetheissuanceoftheSE-50,therewasariskthattheIndonesianTaxOfficemayimposeataxpenaltyof2%fromtheinvoicevalue(taximpositionbase)forthelateissuanceofinvoice(undertheVATlaw,theinvoicemustbeissuedatthelatestbythemonthendofthetelecommunicationservicesrendered).Inpractice,theTelcoCompaniesissueacommercialandVATinvoiceinthefollowingdaysafterthemonthend.

TheclarificationandcertaintyontheissuancedateofVATinvoicesasoutlinedintheSE-50isveryessentialfortheTelcoOperatorsinordertomitigatethesignificantpenaltyof2%fromtheinvoicevalue.

Type of export services that attract zero-rated VAT

On3August2011,theDGTissuedaCircularLetterNo.SE-49/PJ/2011(SE-49)whichprovidesguidancetotaxofficersregardingVATonexportofservices.SE-49confirmsthatzero-ratedVATisonlyapplicabletothethreetypesofservicesstatedintheMinistryofFinanceRegulationNo.PMK-70:a. tollmanufacturingservices;b. repairandmaintenanceserviceswhichareattachedtoservicesor

movablegoodsutilizedoutsidetheCustomsArea;andc. constructionserviceswhichareattachedtoservicesorimmovable

goodslocatedoutsidetheCustomsArea.

OtherthantheserviceslistedinPMK-70,servicesprovidedtocustomersoutsideoftheCustomsAreaare:a. consideredaslocallydelivered,ifperformedwithintheCustoms

Area,andarethereforesubjecttotheregularVATrateof10%;andb. consideredbeyondthescopeoftheVATLaw,andhencenot

subjecttoVAT,ifperformedoutsideoftheCustomsArea.

Therefore,IDDcallincomeearnedbytheIndonesianTelcoCompaniesisarguablynotsubjecttoIndonesianVATbecausetheservicesisperformedoutsideoftheIndonesianCustomsarea.WhilsttheinterconnectionincomeearnedbytheIndonesianTelcoCompaniesfromoffshoreTelcoOperatorswillbesubjectto10%VATbecausetheserviceisperformedwithinIndonesianCustomsArea.Despiteofthis,thereareseveraltaxrulingsconfirmingthattheinterconnectionincomeearnedfromtheoffshoreTelcoCompaniesisnotsubjecttoVAT.

Indonesia’sradiospectrumregulatorplanstoadaptatechnologyneutralapproachwhenlicensing(throughanauctionprocess)partofthe2.3GHZspectrumnextyear.Theplanalsoincludesgivingtheoption–withanadditionallicensefee–forIndonesia’sexistingWiMaxspectrumlicenseholdersin2.3GHztodoin-bandmigrationfromWiMax802.16dto802.16e.

But,whatdoes“technologyneutral”meaninthecontextofspectrumlicensing?Atechnologyneutralspectrumlicensegivestherighttousethespectrumwithoutregardtothetypeoftechnologybeingusedwithinthespecifiedspectrumand,insomecases,theuseofspectrumcanbealteredduringthelicenseperiod.Essentially,regulatorsarereducingmarket-entryrequirementsfornewtechnologiesbyintroducingasimplerspectrumlicensingregime.

Why a technology neutral approach?

Economistshavelongarguedthatmarketmechanismsshouldbeappliedtoradiospectrum.SeminalpapersinthisareastartwithCoasein1959[R.H.Coase,“TheFederalCommunicationsCommission”,JournalofLawandEconomics,2,1–40,1959].Theessentialideahereistoallowpricingmechanismstoactasanincentiveforholdersofspectrumtooptimizetheiruse–buyingmoreiftheirbusinesscasecanjustifyit,sellingspectrumiftheyhaveexcess,andincludingadoptingnewtechnologiesthatcanusespectrummoreefficientlywhereeconomicallyviable;hencethetechnologyneutralapproach.Economictheorysuggeststhatinamarketwhichisperformingwell,thiswillleadtoadivisionofspectrumthatmaximizeseconomicvalue.Undersuchanapproachtheregulatorsetsoutrulesthatenablemarketstofunctionwhileensuringthatinterferenceiscontrolledandthentakesabackseat,leavingittothemarkettodeterminetheuseandusersofthespectrum.

Technology Neutral Spectrum Licensing

16 CommunicationNewsFlash PwCIndonesia

Duetotherapiddevelopmentofnewtechnologyandthespeedofmarketwillingnessinadoptingit,regulatorsarehavingdifficulttimeplayingcatchup.Theonlyviableoptionfortheregulatoristoletthemarketdecidewhichtechnologytoapplythroughacarefulandwellthoughtallocationmechanism.(SeeBOXforcases)

Flexiblepropertyrightsresultedinincreasedspectrumeconomicvalues.Spectrumvaluediffersforeachspectrumlicenseholderandisdeterminedbythefuturecashflowsthataspectrumlicenseholderexpectstogeneratebyutilizingthespectrumcomparedtothenextbestalternative(acquiringnospectrum).Althoughtherearemanyfactorsinvolvedduringspectrumallocationprocess(e.g.auction)thatwillinfluencethespectrumvalues,thefreedominchoosingthebesttechnologywhenutilizingthespectrumwillincreasetheeconomicvalueofthespectrumitself.Fromtheregulatorspointofview,itistheirmainobjectivetocreateandgetthemaximumeconomicvaluefromthespectrumwhichisconsideredasoneofthescarcenationalresources.

Limitation/restriction in applying a technology neutral approach

Inpracticalterms,atruetechnologyneutralapproachcannotbeachieved.Thereareseveralrestrictionsinherentintechnologyneutrallicensing.Firstistheinterferenceproblemandsecondisrestrictionintechnologychoice.ChoiceoftechnologyisinfluencedbyfactorsuchaseconomiesofscaleandinternationalstandardssetbyITU.

Interference problem

AdjacentspectrumblocksuseforFDDandTDDwillinterferewitheachotherandhavetobemanaged,forexamplebyapplyingaguard-bandinbetween.Applyingaguard-bandresultsintechnicalinefficiency–wastedspectrumforguard-bandandthismayalsocreateeconomicinefficiencyduetohigherpriceofthespectrum,sincetheguard-bandspectrumpricehastobetakenintoaccount.

Choice of technology

- Economies of scale. Althoughdifferenttechnologiesandstandardscanbedeployedinthesamespectrumband,spectrumlicenseholdershavetotakeintoaccountthatefficienteconomiesofscale-decreasesinthecostofequipmentandtechnologydevelopment–arekey.Economiesofscalecanbeachieved,intheshortandmediumterm,bystandarddetermina-tion.Inthelongerterm,standardhastobeimproved,enhancedandifnecessaryreplaced.

- International coordination.ITUradioregulationistheregulationsappliedbyITUmembersindeterminingthespectrumusagewithinitsjurisdiction.TheITUregulationsbasicallylimittheextentoftechnologyneutralimple-mentation.

For (future) technology neutral license holders

Atechnologyneutralapproachisinterestingbutdonotforgetthebasicswhenplanningtowinatechnologyneutralspectrumlicense:- Diligentlyestimatetheexpectedrevenueandexpectedcostforutilizing

thespectrumtocomeoutwiththefuturecashflowinordertodeterminethespectrum/licensevalue.

PwCIndonesia CommunicationNewsFlash 17

- Reviewthespectrumlicensemechanism(e.g.auction)andspectrumpropertyrightssetbytheregulators.Factorssuchasroll-outobligation,reserveprice,networksharing,spectrumnaturalcharacteristics(lowerspectrumfrequencyvaluedhigherthanhigherfrequencyspectrum)areimportantandhavetobetakenintoaccountwhendeterminingthespec-trum/licensevalue.

Source:PwC(2009),“Timingiseverything-releasingthevalueofspectrum”

Spectrum/LicenseValue

FutureCashFlows

Expected

Revenues

ExpectedCosts

Determinedby:

•Opportunity

tolaunchnew

products/services

•Customerbase

•Continuanceof

existingservices

•Improve

performanceof

existingservices

Determinedby:

CAPEX/OPEXthat

arelargelydeter-

minedbynetwork

androll-outcosts

18 CommunicationNewsFlash PwCIndonesia

WiMax adoption in Indonesia

In2009,theGovernmentofIndonesia(GOI)awardedaWiMaxlicensetoseveraloperators.Thespectrumallocatedwas2.3GHz.TheGOIspecificallystatedinthelicensethatonlyWiMax802.16dwasallowedtoberolledout.Unfortunately,WiMaxadoptionintheworldhasshiftedtoanewstandard,whichis802.16e.Duetothisfact,theeconomicalcriticalmassforWiMax802.16dadoptioninIndonesiahasneverbeenreachedandthisforcedtheGOItoallowforin-bandmigrationtoWiMax802.16ewhichisplannedtotakeplacein2012.

WiMax802.16disessentiallyafixedwirelessbroadbandanditcanbeseenasacompetitorforDSLbutnotascompetitorformobilewirelessbroadbandtechnologysuchas3GorLTE.Forexample,itisnotpossibletohaveaUSBdongleforWiMax802.16d.

Ontheotherhand,WiMax802.16eisaportableformofwirelessbroadbandanditprovidestheabilityforuserstoconnecttoaWiMAXcellfromavarietyoflocationsandperformcellhandover.

Move to LTE

Whilethemovefrom2Gto3Gbroughtamassiveincreaseinspeedandcapacity,theadvantagesofLTEoverthelatestversionof3G(HSPA+)aresurprisinglylimited,withoverallspectralefficiencydifferenceonlyaround30%to50%,andsubstantialspeedimprovementsdependentonlargeamountofcontiguousspectrumbeingavailable.GiventhemainpurposeofLTEistoservesmartphones,anditmaybesometimebeforeall(orevenmost)newsmartphoneshaveLTEbuiltin,someoperatorsmaychoosetostickwith3Gforthetimebeing(REF:EndersAnalysis–“UK4Gspectrumconsultation:preservingthebig4”–March2011).

Thiscasebringsupthequestionthatcurrently(orinthenearfuture)facedbyregulators:shouldregulatorsallocatespectrumspecificallyforLTEorallocateusingatechnologyneutralapproach?

1

2

Market knows best – cases:

Plaza 89 Jl. H.R. Rasuna Said Kav. X-7 No.6 Jakarta 12940 - INDONESIA P.O. Box 2473 JKP 10001T: +62 21 5212901 F: +62 21 5290 5555/5290 5050

Ay-Tjhing Phan+622152890658ay.tjhing.phan@id.pwc.com

Your PwC Indonesia contacts

ForfurtherinformationonhowPwCIndonesiacanassistyou,pleasecontactoneofthefollowingspecialistsbasedinourJakartaoffice:

Cornelis P Poelman +62215212901ext.75683cornelis.p.poelman@id.pwc.com

Triono Soedirdjo+622152891033triono.soedirdjo@id.pwc.com

Harry Tanoto+622152890739harry.tanoto@id.pwc.com

George Pramadono+622152129010ext.75430george.pramadono@id.pwc.com

Subianto+622152890992subianto.subianto@id.pwc.com

Nita Ruslim +622152890899nita.ruslim@id.pwc.com

Irhoan Tanudiredja +622152890500irhoan.tanudiredja@id.pwc.com

Chrisna Wardhana +622152890300chrisna.wardhana@id.pwc.com

Eddy Rintis +622152891040eddy.rintis@id.pwc.com

Visitourwebsiteat

www.pwc.com/id

Yuliana Sudjonno+622152891066yuliana.sudjonno@id.pwc.com

Abdullah Azis+622152890601abdullah.azis@id.pwc.com

This summary is not intended as professional advice. It is suggested to always consult with your usual PwC contact.

Puttingourvaluesintoaction

Excellence

Deliveringwhatwepromiseandaddingvaluebeyondwhatisexpected.

Weachieveexcellencethroughinnovation, learning and agility.

Teamwork

Thebestsolutionscomefromworkingtogetherwithcolleaguesandclients.

Effectiveteamworkrequiresrelationships, respect and sharing.

Leadership

Leadingwithclients,leadingwithpeopleandthoughtleadership.

Leadershipdemandscourage, vision and integrity.

The way we do business

DISCLAIMER:"PwC"refertothenetworkofmemberfirmsofPricewaterhouseCoopersInternationalLimited(PwCIL).EachmemberfirmisaseparatelegalentityanddoesnotactasagentofPwCILoranyothermemberfirm.PwCILdoesnotprovideanyservicestoclients.PwCILisnotresponsibleorliablefortheactsoromissionsofanyofitsmemberfirmsnorcanitcontroltheexerciseoftheirprofessionaljudgmentorbindtheminanyway.Nomemberfirmisresponsibleorliablefortheactsoromissionsofanyothermemberfirmnorcanitcontroltheexerciseofanothermemberfirm'sprofessionaljudgmentorbindanothermemberfirmorPwCILinanyway.

©2011PwC.Allrightsreserved.NotforfurtherdistributionwithoutthepermissionofPwC."PwC"referstothenetworkofmemberfirmsofPricewaterhouseCoopersInternationalLimited(PwCIL),or,asthecontextrequires,individualmemberfirmsofthePwCnetwork.EachmemberfirmisaseparatelegalentityanddoesnotactasagentofPwCILoranyothermemberfirm.PwCILdoesnotprovideanyservicestoclients.PwCILisnotresponsibleorliablefortheactsoromissionsofanyofitsmemberfirmsnorcanitcontroltheexerciseoftheirprofessionaljudgmentorbindtheminanyway.Nomemberfirmisresponsibleorliablefortheactsoromissionsofanyothermemberfirmnorcanitcontroltheexerciseofanothermemberfirm'sprofessionaljudgmentorbindanothermemberfirmorPwCILinanyway.

PwCIndonesiacomprisesKAPTanudiredja,Wibisana&Rekan,PTPricewaterhouseCoopersIndonesiaAdvisoryandPTPrimaWahanaCaraka,eachofwhichisaseparatelegalentityandallofwhichtogetherconstitutetheIndonesianmemberfirmofthePwCglobalnetwork,whichiscollectivelyreferredtoasPwCIndonesia.