Changes in accounting policies in current year 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 516 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued b. Changes in accounting policies in current year continued i. Financial assets and liabilities continued

B. Financial liabilities

The Group classified its financial liabilities in the category of a financial liabilities at fair value through profit or loss and b financial liabilities measured at amortised cost. Financial liabilities are derecognised from the consolidated balance sheet when redeemed or otherwise extinguished. a Financial liabilities at fair value through profit or loss This category comprises two sub-categories: financial liabilities classified as held for trading, and financial liabilities designated by the Group as at fair value through profit or loss upon initial recognition. A financial liability is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short term profit-taking. Derivatives are also categorised as held for trading unless they are designated and effective as hedging instruments. Gains and losses arising from changes in fair value of financial liabilities classified held for trading are included in the consolidated statement of income and are reported as “Unrealised gainslosses from increasedecrease in fair value of financial instruments”. Interest expenses on financial liabilities held for trading are included in “Interest expenses”. If the Group designated certain debt securities upon initial recognition as at fair value through profit or loss fair value option, then this designation cannot be changed subsequently. According to SFAS 55 Revised 2006, the fair value option is applied on the debt securities consists of debt host and embedded derivatives that must otherwise be separated. Fair value changes relating to financial liabilities designated at fair value through profit or loss are recognised in “Gainslosses from changes in fair value of financial instruments”. b Financial liabilities at amortised cost Financial liabilities at amortised cost are initially recognised at fair value plus transaction costs. After initial recognition, Group measures all financial liabilities at amortised cost using effective interest rates method. Effective interest rate amortisation is recognised as interest expense.