Securities PurchasedSold under ResaleRepurchase Agreements continued

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2010, 2009 AND 2008 Expressed in millions of Rupiah, unless otherwise stated Appendix 534 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

n. Loans continued

Loan Restructuring continued For loan restructurings which involve a conversion of loans into equity or other financial instruments, a loss on loan restructuring is recognised only if the fair value of the equity or financial instruments received, deducted by estimated expenses to sell the equity or other financial instruments, is less than the carrying amount of loans. Overdue interest, which is capitalised to loans under new restructuring agreements, is recorded as deferred interest income and is amortised proportionately based on the amount of capitalised interest relative to the loan principal upon collection. Losses on loan restructuring are presented as part of allowance for impairment losses.

o. Consumer Financing Receivables

Subsidiary’s consumer financing receivables are recognised initially at fair value plus directly attributable transaction costs and deducted by administration income and subsequently measured at amortised cost using the effective interest rate method. Early termination of a contract is treated as a cancellation of an existing contract and the resulting gain or loss is credited or charged to the current year’s consolidated statement of income at the date of transaction. Subsidiary’s consumer financing receivables are classified as financial assets in loans and receivables. Refer to Note 2b for the accounting policy of loans and receivables. Prior to 1 January 2010, consumer financing receivables represented receivables net of unearned income on consumer financing, allowance for doubtful accounts and amount jointly financed by other parties. Transaction costs, administration income and discount insurance were charged and credited directly to the consolidated statement of income. Subsidiary’s unearned consumer financing income is the difference between total installments to be received from customers and total financing plus or deducted with transaction costs and discount insurance which will be recognised as consumer financing income over the term of the contract using effective interest rate. Joint financing Joint financing consists of with and without recourse joint financing to end-user consumers. The consumer financing receivables under joint financing where each party assumes the credit risk according to the risk portion without recourse are stated at net amount in the consolidated balance sheet. Consumer financing income and interest expense related to without recourse joint financing are stated at net amount in the consolidated statement of income. Consumer financing receivables under joint financing where the Subsidiary assume the credit risk with recourse are stated at gross amount in the consolidated balance sheet and the funds received from are presented as borrowings in the consolidated balance sheet in accordance with their portion. The consumer financing income and interest expense related to with recourse joint financing are stated at gross amount in the consolidated statement of income. For joint financing without recourse, Subsidiary has the right to set higher interest rates to customers than those as stated in the joint financing agreements with joint financing providers which is the Bank. The difference is recognised as revenue and disclosed as “Consumer Financing Revenue”.