Placements with Bank Indonesia and other banks

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2015 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated 51 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued n. Derivative receivables and derivative payables continued 3. Gain or loss arising from derivative contract that is designated as a net investment hedge in a foreign operation is reported as other comprehensive income, as long as the transactions are effectively recognised as hedge transactions. 4. Gain or loss arising from derivative contract that is not designated as a hedging instrument or derivative contract that does not qualify as a hedging instrument is recognised as gain or loss in current year. Derivative receivables are classified as financial assets at fair value through profit or loss, meanwhile derivative payables are classified as financial liabilities at fair value through profit or loss. Refer to Note 2c for the accounting policy of financial assets and liabilities at fair value through profit or loss.

o. Loans and sharia receivablesfinancing

Loans represent agreement to provide cash or cash equivalent based on agreements with borrowers, where borrowers are required to repay their debts with interest after a specified period, and matured trade finance facilities which have not been settled within 15 days. Syndicated loans, direct financing and joint financing, and channeling loans are stated at their outstanding balances in proportion to the risks borne by the Bank and its Subsidiaries. Included in loans are financing by Bank Syariah Mandiri “BSM”, a Subsidiary, in the form of sharia receivables, sharia financing and funds of Qardh. Brief explanation for each type of sharia financing is as follows: Mudharabah financing is a co-operation for certain project between first party malik, shahibul mal or Subsidiary as owner of fund and second party amil, mudharib or debtors as fund manager whereas the profit sharing will be shared in accordance with percentage as stated in the agreement, meanwhile losses will be borne by the Subsidiary except if the second party does negligence, error or violate the agreement. Mudharabah financing is stated at the outstanding financing balance less allowance for possible losses. Musyarakah financing is a co-operation between two or more parties in a certain business wherein each party provides a portion of fund on condition that the profit shall be shared based on the agreement, whereas losses shall be borne in accordance with the portion of the fund of each party. Permanent musyarakah is musyarakah in which the fund portion of each partner is stated explicitly in the contract and remains the same until the contract expires. Declining musyarakah musyarakah mutanaqisha is musyarakah in which the fund portion of the Bank will be transferred in several stages to the other partner, resulting in the declining of fund portion of the Bank and, at the end of contract, the other partner will become the sole owner of the business. Musyarakah financing is stated at the outstanding financing balance less allowance for possible losses. Ijarah receivables are the financing on the availability of fund in relation to transferring the right to use and benefit of a good and service based on rental transaction which was not followed by transfer of the goods ownership to the lessee. Ijarah muntahiyah bittamlik is an agreement on the availability of fund in relation to transferring the use right and benefit of a good or service based on rental transaction with an option to transfer the ownership of goods to the lessee. Ijarah receivables are recognised at due date at the amount of it lease income not yet received and presented at its net realisable value, which is the outstanding balance of the receivables. PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2015 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated 52 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued o. Loans and syariah receivablesfinancing continued