PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2008 and 2007 Expressed in millions of Rupiah, unless otherwise stated
27
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued o. Allowance for Possible Losses on Assets and Estimated Losses on Commitments and
Contingencies continued
For Syariah Banks, the classification of earning assets is determined based on Bank Indonesia Regulation No. 57PBI2003 dated May 19, 2003 regarding Earning Assets Quality for Syariah Banks.
The amount of the minimum allowance for possible losses on assets and commitments and contingencies with credit-related risk, takes into consideration Bank Indonesia Regulation
No. 72PBI2005 dated January 20, 2005 regarding Asset Quality Rating For Commercial Banks which has been amended with Bank Indonesia Regulation No. 82PBI2006 dated January 30, 2006 and
Bank Indonesia Regulation No. 96PBI2007 dated March 30, 2007, which prescribe minimum rates of allowance for possible losses on assets and commitments and contingencies with credit-related risk.
The amounts of the minimum allowance in accordance with the Bank Indonesia Regulation are as follows:
1 General provision, at minimum amounting to 1 from the earning assets classified as current, except for earning assets in Certificates of Bank Indonesia and Government Bonds and for earning
assets which are guaranteed with cash collateral such as current accounts, time deposits, savings, margin deposits, gold, Certificates of Bank Indonesia or Government Bonds, Government
Guarantees in accordance with the regulations, standby letters of credit from prime bank, which are issued in accordance with Uniform Customs and Practice for Documentary Credit UCP or
International Standard Practices ISP.
2 Special provision, at minimum amounting to: a. 5 from the asset classified as special mention and after deducting the value of collateral.
b. 15 from the asset classified as sub-standard after deducting with the value of collateral. c. 50 from the asset classified as doubtful after deducting the value of collateral.
d. 100 from the asset classified as loss after deducting the value of collateral.
The collateral which can be deducted from the allowance for possible losses calculation is only for earning assets.
The collateral value which can be deducted from the allowance for possible losses on earning assets is that, with appraisal conducted not exceeding 24 months and is done by an independent appraisal for
amounts exceeding Rp5 five billion. Bank Mandiri has not included all collateral in the calculation of allowance for possible losses since the
last appraisal has exceeded 24 months. The estimated loss on commitments and contingencies with credit-related risk is presented in the
liabilities section of the consolidated balance sheets. The outstanding balances of earning assets classified as loss are written off against the respective
allowance for possible losses when the management of Bank Mandiri and Subsidiaries believes that the earning assets are uncollectible. Recoveries of earning assets previously written off are recorded
as an addition to the allowance for possible losses during the year. If the recovery exceeds the principal amount, the excess will be recognized as interest income.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2008 and 2007 Expressed in millions of Rupiah, unless otherwise stated
28
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
p. Premises and equipment and Leased assets i. Fixed assets
Prior to January 1, 2008, premises and equipment are stated at cost except for certain premises and equipment used in operations that were revalued in 1979, 1987 and 2003 in accordance with
Government regulations less accumulated depreciation except for land which is not depreciated. The corresponding revaluation increments were credited to “Revaluation Increment of Premises and
Equipment” under the shareholders’ equity in the consolidated balance sheets. Effective January 1, 2008, Bank Mandiri applied PSAK No. 16 Revised 2007, “Fixed Assets”, which
supersedes PSAK No. 16 1994, “Fixed Assets and Other Assets”, and PSAK No. 17 1994, “Accounting for Depreciation”. Bank Mandiri had previously revalued its premises and equipment
before the application of PSAK No. 16 Revised 2007 and has chosen the cost model, thus, the revalued amount of premises and equipment is considered as deemed cost and the cost is the value
at the time PSAK No. 16 Revised 2007 is applied. All the balance of revaluation increment of premises and equipment that still exist at the first time application of PSAK No. 16 Revised 2007 as
presented in shareholders’ equity section in the consolidated balance sheet have been reclassified to consolidated retained earnings in 2008 Note 31c.
Premises and equipment except for land is stated at cost less accumulated depreciation and impairment losses. Such cost includes the cost of replacing part of the premises and equipment
when that cost is incurred, if the recognition criteria are met. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the premises and equipment as a
replacement if the recognition criteria are satisfied. All other repairs and maintenance costs that do not meet the recognition criteria are recognized in consolidated profit or loss as incurred.
Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows:
Years Buildings
20 Furniture, fixtures, office equipment and computer equipmentsoftware
5 Vehicles
5 An item of premises and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset calculated as the difference between the net disposal proceeds and the carrying amount of the
asset is included in consolidated profit or loss in the year the asset is derecognized. The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted
prospectively if appropriate, at each financial year end. Construction in progress is stated at cost and is presented as part of premises and equipment.
Accumulated costs are reclassified to the appropriate premises and equipment account when the assets are substantially complete and are ready for their intended use.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2008 and 2007 Expressed in millions of Rupiah, unless otherwise stated
29
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued p. Premises and equipment and Leased assets continued
i. Fixed assets continued In accordance with PSAK No. 47 - “Land Accounting”, all costs and expenses incurred in relation
with the acquisition of the landright, such as license fee, survey and measurement cost, notary fee and taxes, are deferred and presented separately from the cost of the landright. The deferred cost
related to the acquisition of the landright was presented as part of Other Asset in the consolidated balance sheet, and amortized over the period of the related landright using straight-line method.
In addition, PSAK No. 47 also states that landright is not amortized unless it meet certain required conditions.
PSAK No. 48 - “Decline in Assets Value” states that the carrying amounts of fixed assets are reviewed as of each balance sheet date to assess whether they are recorded in excess of their
recoverable amounts and, when carrying value exceeds this estimated recoverable amount, assets are written down to their recoverable amount.
ii. Leased assets Effective January 1, 2008, the Statement of Financial Accounting Standard PSAK No. 30 Revised
2007, “Leases” supersedes PSAK No. 30 1990 “Accounting for Leases”. Based on PSAK No. 30 Revised 2007, the determination of whether an arrangement is, or contains a lease is based on the
substance of the arrangement at inception date and whether the fulfillment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset.
Under this revised PSAK, leased item are classified as finance leases. Moreover, leases which do not transfer substantially the risks and reward incidental to ownership of the leased item are
classified as operating leases. Based on PSAK No. 30 Revised 2007, under a finance leases, the Bank recognizes assets and
liabilities in its consolidated balance sheet at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of
the lease. Minimum lease payment is apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to
produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents shall be charged as expenses in the periods in which they are incurred. Finance charges are
reflected in the consolidated profit and loss. Capitalised leased assets presented under premises and equipment are depreciated over the shorter of the estimated useful life of the assets and the
lease term, if there is no reasonable certainty that the Bank will obtain ownership by the end of the lease term.
Under an operating lease, the Bank recognized lease payments as an expense on a straight-line method over the lease term.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2008 and 2007 Expressed in millions of Rupiah, unless otherwise stated
30
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued q. Other Assets
