2004 ANNUAL REPORT  | 61 Notes To Consolidated Financial Statements Note 2.  Ownership in Subsidiaries and Joint Ventures With Rio Tinto FCX owns 100 percent of FM Services Company. FM Services  Company provides certain administrative, financial and other  services on a cost-reimbursement basis to FCX and provides  similar services to two other public companies under manage- ment services agreements with fixed fee terms plus reim- bursements for special projects and out-of-pocket expenses.  The costs billed to FCX and PT Freeport Indonesia, which  include related overhead, totaled $34.6 million in 2004, $33.4  FCX owns 100 percent of the outstanding Atlantic Copper  common stock. At December 31, 2004, FCX’s net investment in  Atlantic Copper totaled $97.4 million, FCX had $189.5 million  of loans outstanding to Atlantic Copper and Atlantic Copper’s  debt under financing arrangements that are nonrecourse to  FCX totaled $12.3 million. Atlantic Copper is not expected  to pay dividends in the near future. Under the terms of its  concentrate sales agreements with Atlantic Copper, PT Freeport  Indonesia had outstanding trade receivables from Atlantic  Copper totaling $146.0 million at December 31, 2004. FCX  made cash contributions to Atlantic Copper totaling $202.0  million in 2004, $10.0 million in 2003 and $25.0 million in  2002. These transactions had no impact on FCX’s consoli- dated financial statements. Substantially all of PT Freeport Indonesia’s assets are  located in Indonesia. Events in Indonesia during 2004 mainly  centered on the national elections. The presidential election  was conducted peacefully and after a runoff, Susilo Bambang  Yudhoyono was declared the new president in October.  Indonesia continues to face political, economic and social  uncertainties, including separatist movements and civil and  religious strife in a number of provinces.  Ownership in Subsidiaries.  FCX’s direct ownership in  PT Freeport Indonesia totaled 81.3 percent at December 31,  2004 and 2003. PT Indocopper Investama, an Indonesian  company, owns 9.4 percent of PT Freeport Indonesia and FCX  owns 100 percent of PT Indocopper Investama. In July 2004,  FCX received a request from the Indonesian Department  of Energy and Mineral Resources that it offer to sell to  Indonesian nationals shares in PT Indocopper Investama at  fair market value. In response to this request and in view  of the potential benefits of having additional Indonesian  ownership in the project, FCX has agreed to consider a  potential sale of an interest in PT Indocopper Investama  at fair market value. Neither its Contract of Work with the  Indonesian government nor Indonesian law requires FCX to  divest any portion of its ownership in PT Freeport Indonesia  or PT Indocopper Investama. At December 31, 2004, PT  Freeport Indonesia’s net assets totaled $2.3 billion and its  retained earnings totaled $2.1 billion. As of December 31, 2004,  FCX has two outstanding loans to PT Freeport Indonesia  totaling $192.4 million. Through December 31, 2004, FCX accounted for grants  of employee stock options under the recognition prin- ciples of APB Opinion No. 25, “Accounting for Stock Issued  to Employees,” and related interpretations, which require  compensation costs for stock-based employee compensa- tion plans to be recognized based on the difference on the  date of grant, if any, between the quoted market price of  the stock and the amount an employee must pay to acquire  the stock. If FCX had applied the fair value recognition  provisions of SFAS No. 123, “Accounting for Stock-Based  Compensation,” which requires compensation cost for all  stock-based employee compensation plans to be recognized  based on the use of a fair value method, FCX’s net income  would have been reduced by $5.2 million, $0.05 per diluted  share, for 2004, $4.7 million, $0.05 per diluted share, for  2003 and $6.5 million, $0.07 per diluted share, for 2002 (see  ”Stock-Based Compensation”). FCX must adopt SFAS No. 123  (revised 2004) no later than July 1, 2005; however, FCX can  elect to adopt SFAS No. 123 (revised 2004) as early as January  1, 2005. FCX is still reviewing the provisions of SFAS No. 123  (revised 2004) and has not yet determined if it will adopt  SFAS No. 123 (revised 2004) before July 1, 2005. Also, stock  options were granted to employees in February 2005, including  multi-year grants to senior executive officers. As a result, the  annual charges for share-based payments will be higher than  the pro forma annual amounts presented under “Stock-Based  Compensation.” Based on currently outstanding employee  stock options, including those granted in February 2005, if  FCX adopts SFAS No. 123 (revised 2004) on July 1, 2005, FCX  estimates the charge to earnings before taxes and minority  interest sharing in the second half of 2005 would total approxi- mately $11 million, and the reduction in net income would  be approximately $6.5 million, $0.04 per basic share using  common shares outstanding at December 31, 2004. In December 2004, the FASB issued SFAS No. 123 (revised  2004), “Share-Based Payment.” SFAS No. 123 (revised 2004)  requires all share-based payments to employees, including  grants of employee stock options, to be recognized in the  income statement based on their fair values. New Accounting Standards.  In November 2004, the FASB  issued SFAS No. 151, “Inventory Costs, an amendment of  ARB No. 43, Chapter 4.” SFAS No. 151 clarifies that abnormal  amounts of idle facility expense, freight handling costs and  wasted materials (spoilage) should be recognized as current- period charges and requires the allocation of fixed produc- tion overheads to inventory based on the normal capacity  of the production facilities. FCX must adopt SFAS No. 151 no  later than January 1, 2006. FCX has not yet determined when  it will adopt SFAS No. 151; however, FCX currently does not  expect adoption to have a material impact on its accounting  for inventory costs.