Consumer Financing Receivables 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 Reinsurance Assets Reinsurance assets are the cedants net contractual rights under a reinsurance contract. The amount of reinsurance asset of the liability for future policy benefits, unearned premiums and estimated claims liability are estimated in a manner consistent with the approach used in determining the liability for future policy benefits, unearned premiums and claims liability estimates, based on the terms and the terms of the insurance contract. The Group’s management assesses at each consolidated statement of financial position date whether reinsurance assets are impaired. Reinsurance asset impairment occurs if, and only if, there is an objective evidence that the cedant did not receive the entire amount in accordance with the contract requirements and the impact can be measured reliably. Impairment loss is recognized in the consolidated of statement of comprehensive income. Liabilities for Future Policy Benefits Liabilities for future policy benefits represent the difference between the present value of future policy benefits and the present value of the expected future premiums. The liabilities for future policy benefits are estimated by the Company’s registered actuary based on outstanding policies in-force, including policies with unpaid premiums within the policy grace period, in accordance with actuarial principles generally accepted in Indonesia. Policy acquisition costs are not deferred and are charged to expense as incurred. Changes in liabilities for insurance policy benefits are recognized as underwriting expenses in the consolidated statement of comprehensive income for the current year. Unearned Premiums and Estimated Claims Liability Unearned premiums are calculated using the daily method by individual policy. Estimated claims liability represents amounts set aside to provide for the outstanding and incurred claims arising from insurance policies in force during the accounting period. The liability includes both reported and unreported claims. Insurance Contract Liabilities Insurance contract liabilities consist of premiums received in advance, estimated claim liabilities, unearned premium and liability for future policy benefits. On reporting date, the Group assesses insurance contract liabilities whether the recognized insurance liabilities are adequate using current estimates of future cash flow under the insurance contract. If the assessment represent insurance liability less related deferred acquisition cost is not adequate if compared to current estimates of future cash flows, the deficiency is recognized in the consolidated statement of comprehensive income.

x. Loans Received

Loans received are stated at amortized cost. Loans received classified as financial liability measured at amortized cost using the effective interest rate method. Transaction costs that are directly attributable to the acquisition cost of loan received, are deducted from the loans received Note 2h. - 39 - 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

y. Securities Issued

Securities issued are securities issued in the form of Medium Term Notes MTN and Bonds. Medium term notes are classified as financial liabilities measured at amortized cost using the effective interest method. Transaction costs that are directly attributable to the acquisition of securities issued are deducted from the amount of securities issued Note 2h.

z. Financial Guarantee Contracts

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 from Group to bank, financial institutions and other institutions on behalf of customers to secure loans and other banking facilities. Initial recognition of financial guarantees in the consolidated financial statements is recognized at fair value at the time the guarantee is given. The fair value of financial guarantee at the time of the transaction is generally equal to the premium received,with normal terms and conditions, and the initial fair value is amortized over the life of financial guarantee. Subsequently, these contracts are measured at the higher of amortized amount and the present value of any expected payment when a payment under the guarantee has become probable and the difference is charged to other operating expense in the consolidated statement of comprehensive income. aa. Stock Issuance Costs Stock issuance costs are deducted from the additional paid-in capital portion of the related proceeds from issuance of shares and are not amortized. ab. Revenue and Expense Recognition 1. Recognition of Interest Revenues, Interest Expense, Sharia Revenue, and Revenue Sharing Distribution Interest Revenue and Interest Expense Interest income and interest expense for all financial instruments are recognized in the consolidated statement of comprehensive income on accrual basis using the effective interest rate method. Transaction costs incurred and are directly attributable to the acquisition or issuance of financial instruments not measured at fair value through profit and loss are amortized over the life of financial instruments using the effective interest rate method and recorded as part of interest income for transaction costs, directly attributable to financial assets, and as part of interest expense for transaction costs related to financial liabilities. - 40 -