In 2003, Antam’s management decided to retroactively recognize, with effect from 2001, for the estimated current and future post-retirement health liabilities and associated costs of substantially all of Antam’s qualified permanent employees. The Aneka Tambang Pensioner Health Foundation manages Antam’s post retirement healthcare plan. The liability for 2003 was estimated at Rp395 billion (USD46.5 million) accounted mostly in non-current liabilities. This has significantly raised Antam’s total liabilities and has reduced income, as reported in previous audited reports.

Why did Antam decide to recognize this liability?
Following a comprehensive review of the plan, Antam decided to take greater control over costs and set a maximum annual contribution limit of Rp5 million (USD587) for out-patient care, excluding major illnesses, per pensioner family per year. This policy is also intended to give Antam’s pensioners more certainty as regards their health coverage.

Previously Antam would pay the Pensioner Health Foundation based an claims from the foundation, which were changed to operating expenses, meaning that Antam would directly pay the plan expenses incurred during the year and no liability was recorded. By setting the maximum contribution, Antam is now able to estimate on an accrual basis the estimated future liability related to the plan.

Were previous reports in compliance with relevant accounting standards?
Antam emphasizes that the move is not a sign of an earlier attempt by management to bury an expense. Previous accounts complied fully with Indonesian accounting standards, but now Antam wishes to more precisely recognize this liability, due to international trends for more accurate accounting and as the average age of its employees and pensioners grows older.

Under Indonesian GAAP, there is no accounting standard specifying the accounting treatment to determine the expense and liability for healthcare plans granted to employees for the period subsequent to retirement. These benefits are recognized as an estimated liability when there is a present obligation as a result of a past event, and it is probable that resources will be required to settle the obligation and a reliable estimate can be made of the obligation amount. Antam decided to account more accurately for this liability using the applicable Indonesian GAAP (rule 57 on Estimated Liabilities), which was applicable from 2001, in combination with an independent actuary calculation, by PT Dayamandiri Dharmakonsilindo, based on International Accounting Standard 19, where these benefits are accounted for over the estimated service period of Antam’s employees based on actuarial assumptions.

What was the impact?
The table below indicates the changes made to previous audited reports due to recognizing the liability of the postretirement health plan:

Antam makes every effort to ensure its accounts present the most accurate information as regards Antam’s financial position and financial performance.