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 536 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
p. Fixed Assets and Leased Assets continued
ii. Leased assets Effective 1 January 2008, the Statement of Financial Accounting Standard SFAS No. 30
Revised 2007, “Leases” supersedes SFAS No. 30 1990 “Accounting for Leases”. Based on SFAS No. 30 Revised 2007, the determination of whether an arrangement is, or contains a
lease is based on the substance of the arrangement at inception date and whether the fulfillment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a
right to use the asset. Under this revised SFAS a lease that transfers substantially all the risk and rewards incidental to ownership of an assets is classified as finance lease. Moreover, leases
which do not transfer substantially the risks and reward incidental to ownership of the leased item are classified as operating leases.
Based on SFAS No. 30 Revised 2007, under a finance leases, Bank and Subsidiaries recognise assets and liabilities in its consolidated balance sheet at amounts equal to the fair value of the
leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Lease payment is apportioned between the finance charge and the
reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the
liability. Finance charges are reflected in the consolidated statement of income. Capitalised leased assets presented under fixed assets are depreciated over the shorter of the estimated
useful life of the assets and the lease term, if there is no reasonable certainty that the Bank will obtain ownership by the end of the lease term.
Under an operating lease, the Bank recognise lease payments as an expense on a straight-line basis over the lease term.
iii.Assets with Build Operate Transfer BOT agreement The Bank’s asset transferred to the investor in the Build, Operate, Transfer BOT agreement will
be re-transferred to the Bank at the end of the concession period. Upon the transfer of the BOT assets from the investor to the Bank, the Bank will record this asset by crediting BOT income if
there is certainty of the economic benefits from the assets or by crediting to deferred income if there is uncertainty of the economic benefits. BOT assets are recorded at fair value or
development costs agreed in the BOT contract or based on the acquisition costs, whichever is objective and reliable.
q. Investments in Shares
Investments in shares represent long-term investments in non-publicly-listed companies and temporary investments in debtor companies arising from conversion of loans to equity.
Investments in shares representing ownership interests of 20.00 to 50.00 are accounted for using the equity method. Under this method, investments are stated at cost and adjusted for the
Bank’s proportionate share in the net equity of the investees and reduced by dividends earned since the acquisition date net of by allowance for impairment losses.
Temporary investments in debtor companies arising from the conversion of loans to equity debt to equity swaps are accounted for using the cost method regardless of the percentage of ownership,
less an allowance for impairment losses.
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 537 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
q. Investments in Shares continued
Allowance for impairment losses on temporary investments from debt to equity swaps are determined using Bank Indonesia criteria set out in Bank Indonesia Regulation No. 72PBI2005
dated 20 January 2005 on “Asset Quality Ratings for Commercial Banks”. This regulation classifies temporary investments from debt to equity swaps into the following classifications:
Holding Period Current
Up to 1 year Substandard
More than 1 year up to 4 years Doubtful
More than 4 years up to 5 years Loss
More than 5 years or the temporary investment has not been liquidated despite of the investee’s has accumulative profits
Temporary investment is written-off from the consolidated balance sheets if it is held for more than 5 years in accordance with Bank Indonesia Regulation No. 72PBI2005 dated 20 January 2005 on
“Asset Quality Ratings for Commercial Banks”.
Investment in shares with ownership below 20 are classified as financial assets available for sale. Refer to Note 2b for the accounting policy of financial assets available for sale.
Changes in value of investments in subsidiaries which is caused by changes in the subsidiaries’ equity and is not a transaction between the Bank and the Subsidiaries, is recognised as part of the
equity as “Difference in Transactions of Equity Changes in Subsidiaries”. This account will be calculated in determining the parent companies’ profit and loss at the disposal of the investment
Note 33e.
Goodwill is recognised, when there is a difference between the acquisition cost and the Bank’s portion of the fair value of identified assets and liabilities at the exchange date. Goodwill is
presented as other assets and amortised as expense over the period using the straight-line method, unless there is other method considered more appropriate in certain conditions. The Goodwill
amortisation period is 5 five years, but a longer amortisation period may be applied with maximum 20 years period with appropriate basis.
r. Allowance for Possible Losses on Non-Earning Assets
Non-earning assets of Bank Mandiri and the Subsidiaries’ assets consist of repossessed assets, abandoned properties, inter-office accounts and suspense accounts.
Non earning assets are divided into “Current”, “Sub-Standard”, “Doubtful” and “Loss”, Marketable securities classified as “Current”, “Substandard” and “Loss”.
In accordance with Bank Indonesia Regulation No. 72PBI2005 dated 20 January 2005 on “Asset Quality Ratings for Commercial Banks”, starting from 20 January 2006, the Bank is also required to
make a special allowance for possible losses on non-earning assets, such as repossessed assets, abandoned properties, inter-office accounts and suspense accounts.
This regulation classifies repossessed assets and abandoned properties into the following classification:
Holding Period Current
Up to 1 year Substandard
More than 1 year up to 3 years Doubtful
More than 3 years up to 5 years Loss
More than 5 years
