Foreign Currency Translation Summary of Significant Accounting and Financial Reporting Policies

PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements For the Years Ended December 31, 2014 and 2013 Figures are Presented in Millions of Rupiah,unless Otherwise Stated If there is an objective evidence that an impairment has been incurred on financial assets in loans and receivables or HTM investments category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows excluding future credit losses that have not been incurred discounted at the financial asset’s original effective interest rate i.e., the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of loss is charged to the consolidated statement of comprehensive income. The calculation of the present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. For the purposes of a collective assessment impairment, financial assets are grouped based on similar characteristics such as credit risk and credit segmentation considering delinquent status. The characteristics chosen are relevant to the estimation of future cash flows from the assets that indicates the ability of the debtor counterparty to pay allliabilities with maturities corresponding contractual terms of the assets being assessed. Future cash flows from the financial assets that are collectively assessed for impairment, are estimated based on contractual cash flows and historical loss experience for assets with similar credit risk characteristics of the group. Historical loss experience is adjusted on the basis of current observable data to reflect effects in the period in which the experience is based and to remove the effects of conditions in the historical period that do not currently exist. If, in a subsequent year, the amount of the impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in the consolidated statement of comprehensive income, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. When a financial asset is uncollectible, it is written off against the related allowance for impairment loss. Such financial asset is written off after all the necessary procedures have been completed and the amount of the loss has been determined. 2. Financial Assets Carried at Cost If there is an objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, the amount of the loss is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. 3. AFS Financial Assets In case of equity investments classified as AFS, assessment of any impairment would include a significant or prolonged decline in the fair value of the investments below its cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the profit and loss is removed from equity and recognized in the profit and loss. Impairment losses on equity investments are not reversed through the profit and loss. Increases in fair value after impairment are recognized directly in equity. - 28 - PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements For the Years Ended December 31, 2014 and 2013 Figures are Presented in Millions of Rupiah,unless Otherwise Stated In the case of debt instruments classified as AFS, impairment is assessed based on the same criteria as financial assets carried at amortized cost. Interest continues to be accrued at the original effective interest rate on the reduced carrying amount of the asset and is recorded as part of interest income in the consolidated statement of comprehensive income. If, in subsequent year, the fair value of a debt instrument increased and the increase can be objectively related to an event occurring after the impairment loss was recognized in the consolidated statement of comprehensive income, the impairment loss is reversed through profit and loss. Derecognition of Financial Assets and Liabilities 1. Financial Assets Financial asset or, where applicable, a part of a financial asset or part of a group of similar financial assets is derecognized when: a. The rights to receive cash flows from the financial asset have expired; b. The Group retains the right to receive cash flows from the financial asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or c. The Group has transferred its rights to receive cash flows from the asset and either i has transferred substantially all the risks and rewards of the financial asset, or ii has neither transferred nor retained substantially all the risks and rewards of the financial asset, but has transferred control of the financial asset. Where the Group has transferred its rights to receive cash flows from a financial asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the financial asset is recognized to the extent of the Group continuing involvement in the financial asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. 2. Financial Liabilities A financial liability is derecognized when the obligation under the contract is discharged, cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability. The recognition of a new liability and the difference in the respective carrying amounts is recognized in the consolidated statement of comprehensive income.

i. Securities

Securities consist of SBI, bonds, medium term notes, export bill receivables, and other money market and capital market securities. Bonds consist of Government Bonds and Corporate Bonds purchased from the market. Marketable securities are classified as financial assets held for trading, loans and receivables, and available for sale. Refer to Note 2h for the accounting policy for financial assets held for trading, loans and receivables and available for sale. - 29 - PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements For the Years Ended December 31, 2014 and 2013 Figures are Presented in Millions of Rupiah,unless Otherwise Stated Marketable securities are initially measured at fair value plus directly attributable transaction costs. For securities measured at fair value through profit and loss, the transaction costs are directly charged to profitloss. Investment in Sukuk 1. Investment in sukuk measured at cost Investment in sukuk is initially measured at cost, including transaction costs. The difference between the acquisition cost and the nominal value is amortized on a straight-line basis over the term of the sukuk. If indication of impairment exists then the amount of impairment loss is measured as the difference between the recoverable amount of sukuk and its carrying value. 2. Investment in sukuk measured at fair value Investment in sukuk is measured at cost, excluding transaction costs. After initial recognition, the difference between the fair value and the carrying amount is recognized in the consolidated statement of comprehensive income.

j. Consumer Financing Receivables

Consumer financing is financing activity for procurement of goods based on the needs of consumer with payment by installments. Consumer financing receivables are categorized as loans and receivable and are stated at amortized cost less allowance for doubtful accounts see Note 2h. Interest income is recognized based on the effective interest rate method. In relation to joint consumer financing transactions and channeling of consumer financing receivables with other parties, the Group’s responsibility is to collect and administer the transferred consumer financing receivables. The difference between the interest charged to the customers by the Group and the interest charged by the investors is recognized as income by the Group and directly credited to the “Consumer financing income” account in the consolidated statements of comprehensive income. In joint financing and credit channeling transactions on a with recourse basis, the Group recognizes assets or liabilities in its books. In joint financing and credit channeling transactions on a without recourse basis, the assets are presented at net amounts in the consolidated statements of financial position. Receivables are deemed uncollectible if the debtors are unable to pay and, and have been delinquent for more than 90 to 120 days. The Group repossesses the collateral – vehicle if the consumers had not made payments despite issuance of two collection letters. When the collateral - vehicle has been repossessed from the consumers, the consumer financing receivables are written off. The repossessed vehicle is stated at the lower of the carrying value of consumer finance receivables or net realizable values. Any difference between the carrying amount and net realizable value is recorded as the allowance for impairment loss and normally charged to operations in the year such costs are incurred. In the settlement of receivables, the consumer authorizes the Group to sell the vehicle or perform other actions in case of breach of the financing agreement. If the selling price of the vehicle is lower than the collateral value of financing receivables, the difference is charged to the consolidated statement of comprehensive income. - 30 -