Financial instruments continued G. Allowance for impairment losses of financial assets

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2012 AND 2011 Expressed in millions of Rupiah, unless otherwise stated Appendix 526 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

c. Financial instruments continued G. Allowance for impairment losses of financial assets continued

a Financial assets carried at amortised cost continued Collective impairment calculation continued Subsequent recoveries of loans written off in the current year are credited to the allowance account. Subsequent recoveries of loans written off in previous year, are recognised as other non- operating income. b Financial assets classified as available for sale The Group assesses at each date of the consolidated statements of financial position whether there is objective evidence that a financial asset or a group of financial assets is impaired. Refer to Note 2c.G.a for the criteria of objective evidence of impairment. In the case of debt instruments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is objective evidence of impairment resulting in the recognition of an impairment loss. If any such evidence exists for available for sale financial assets, 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 recognised in consolidated statements of comprehensive income - is removed from equity and recognised in the consolidated statement of comprehensive income. If, in a subsequent period, the fair value of a financial asset classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the consolidated statement of comprehensive income. c Financial guarantee contracts and commitments Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss incurred because a specified debtor defaulted to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and other institutions on behalf of customers to secure loans and other banking facilities. Financial guarantees are initially recognised in the consolidated financial statements at fair value on the date the guarantee was given. The fair value of a financial guarantee at inception is likely to equal the premium received because all guarantees are agreed on arm’s length terms. Subsequent to initial recognition, the bank’s liabilities under such guarantees are measured at the higher of the initial amount, less amortisation of fees recognised, and the best estimate of the amount required to settle the guarantee. These estimates are determined based on experience of similar transactions and history of past losses, supplemented by the judgement of management. The fee income earned is amortised over the period of guarantees using the straight line method. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2012 AND 2011 Expressed in millions of Rupiah, unless otherwise stated Appendix 527 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

c. Financial instruments continued G. Allowance for impairment losses of financial assets continued