Basis of Preparation of the Consolidated Financial Statements continued

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2012 AND 2011 Expressed in millions of Rupiah, unless otherwise stated Appendix 517 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

c. Financial instruments A. Financial assets

The Group classifies its financial assets in the following categories of a financial assets at fair value through profit and loss, b loans and receivables, c held-to-maturity financial assets, and d available-for-sale financial assets. The classification depends on the purpose for which the financials assets were acquired. Management determines the classification of its financial assets at initial recognition. a Financial assets at fair value through profit or loss This category comprises two sub-categories: financial assets classified as held for trading, and financial assets designated by the Group as at fair value through profit or loss upon initial recognition. A financial asset 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. A financial asset designated as fair value through profit or loss at inception are held to back the insurance liabilities of Subsidiary measured at fair value of the underlying assets. Financial instruments included in this category are recognised initially at fair value; transaction costs are taken directly to the consolidated statement of income. Gains and losses arising from changes in fair value and sales of these financial instruments are included directly in the consolidated statement of income and are reported respectively as “Unrealised gainslosses from increasedecrease in fair value of financial instruments” and “Gainslosses from sale of financial instruments”. Interest income on financial instruments held for trading are included in “Interest income”. b Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than: - those that the Group intends to sell immediately or in the short term, which are classified as held for trading, and those that the Group upon initial recognition designates as at fair value through profit or loss; - those that the Group upon initial recognition designates as available for sale; or - those for which the Group may not recover substantially all of its initial investment, other than because of loans and receivables deterioration.