PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2011 AND 2010
Expressed in millions of Rupiah, unless otherwise stated
Appendix 525 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 Bank determines loans to be evaluated for impairment through individual evaluation if one of
the following condition is met: 1. Loans which individually have significant value and objective evidence of impairment; or
2. Restructured loans which individually have significant value. Bank determines loans to be evaluated for impairment through collective evaluation if one of
the following condition is met: 1. Loans which individually have significant value and there are no objective evidence of
impairment; or 2. Loans which individually have insignificant value; or
3. Restructured loan which individually have insignificant value. Individual impairment calculation
The amount of the loss is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows excluding future impairment
losses that have not been incurred discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the allowance for
impairment losses account and the amount of the loss is recognised in the consolidated statement of income. If a loan or held-to-maturity financial assets has a variable interest
rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for
obtaining and selling the collateral, whether or not foreclosure is probable.
The Bank uses a fair value of collateral method as a basis for future cash flow if, one of the following conditions is met:
1. Loans are collateral dependent, i.e. if source of loans repayment comes only from the collateral; or
2. Foreclosure of collateral is most likely to occur and supported with legal binding aspect. Collective impairment calculation
For the purpose of a collective evaluation of impairment, financial asset are grouped on the basis of similar credit risk characteristics such by considering credit segmentation and past-
due status. Those characteristics are relevant to the estimation of future cash flows for groups of such assets which indicate debtors or counterparties’ ability to pay all amounts
due according to the contractual terms of the assets being evaluated.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2011 AND 2010
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 Future cash flows in a group of financial assets that are collectively evaluated for impairment
are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the Bank. Historical loss experience is adjusted on the
basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of
conditions in the historical period that do not currently exist.
The Group uses statistical model analysis methods, namely roll rates analysis method and migration analysis method for financial assets impairment which collectively assessed, using
at the minimum of 3 three years historical data.
In migration analysis method, management determines 12 months as the estimated and identification period between a loss occuring for each identified portfolio, except for Micro
banking segment in which the loss identification period used 9 months.
When a loan is uncollectible, it is written off against the related allowance for loan impairment. Such loans are written off after all the necessary procedures have been
completed and the amount of the loss has been determined. Impairment charges relating to loans and marketable securities in held-to-maturity and loans and receivables categories
are classified into “Allowance for impairment losses”.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised such
as an improvement in the debtor’s credit rating, the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the impairment reversal is
recognised in the consolidated statement of income.
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 balance sheet 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 income – is removed from equity and
recognised in the consolidated statement of income.
