Fund Borrowings SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 544 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
ad. Premium income recognition, Claims and benefits expenses and Unearned premium income
continued Subsidiary’s unearned premium income represents part of the premiums already received but not
yet earned, from the outstanding term insurance and supplementary benefit insurance coverage. Unearned premium income is computed in aggregate - at least 40 of own retention premiums in
accordance with the Decision Letter of the Minister of Finance of the Republic of Indonesia No. 424KMK.062003.
ae. Fees and Commissions Income
Since the implementation of SFAS No. 55 Revised 2006 on 1 January 2010, fees and commissions income directly attributable to lending activities, are recognised as a partdeduction
of lending cost and will be recognised as interest income by amortising the carrying value of loan with effective interest rate method.
Prior to 1 January 2010, significant fees and commissions income that are directly related to lending activities andor involving specific periods are deferred and amortised using the straight-line method
over the term of the underlying contract, whilst insignificant fee and commission income are directly recognised when the transaction occurred. The unamortised fees and commissions balances
relating to loans settled prior to maturity are recognised upon settlement date.
Other fees and commissions income which are not directly related to lending activities or a specific periods are recognised as revenue on the transaction date.
af. Employee Benefits Pension Liability
Bank Mandiri established a defined contribution pension plan covering substantially all of its eligible employees from 1 August 1999 and also defined benefit pension plans, which were derived from
each of the Merged Banks’ pension plan. This program is funded through payment to pension fund management as defined in the regular actuarial calculation.
Bank Mandiri and Subsidiaries’ pension liability has been calculated by comparing the benefit that will be received by an employee at normal pension age from the Pension Plans with the benefit as
stipulated under the Labor Law No. 132003 after deducting accumulated employee contributions and the results of its investments. If the pension benefit from the Pension Plans is less than the
benefit as required by the Labor Law, the Bank and Subsidiaries will have to pay such shortage.
The pension plan based on the labor law is a defined benefit plan because the labor law requires a certain formula to calculate the minimum pension benefit. A defined benefit plan is a pension plan
that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation.
The liability recognised in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair
value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service cost. The defined benefit obligation is calculated annually by independent actuaries using
the projected unit credit method on a regular basis for periods not exceed one year. The present value of the defined benefit obligation is determined by discounting the estimated future cash
outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefit will be paid, and that have terms to maturity approximating the terms of the related
pension liability.
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 545 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
af. Employee Benefits continued Pension Liability continued
Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and amendments to pension plans when exceeding 10.00 of defined benefit or 10.00 of fair
value program’s asset are charged or credited to income or expense over the average remaining service lives of the related employees.
Other Post-Employment Benefit Obligations
The Bank provides benefit to employees prior to retirement age which employees are released from their active routine job and do not have to come to work, but they are still entitled to employee
benefits.
The entitlement to these benefits is usually based on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these
benefits are accrued over the period of employment, using an accounting methodology similar but simplified to that for defined benefit pension plans. These obligations are valued annually by
independent qualified actuaries.
Tantiem Distribution
Bank Mandiri records tantiem on an accrual basis since 2008 and charges it to the consolidated statements of income.
ag. Share - Base Employee Compensation
The Bank has granted stock options to the Directors and Senior Management at certain levels and based on certain criteria under the Management Stock Option Plan MSOP. Stock compensation
cost is calculated at the grant date using the fair value of the stock options and is recognised as part of salaries and employee benefits expense, over the vesting period of the stock options based on
graded vesting. The accumulated stock compensation costs are recognised as ‘Share Options’ in the shareholders’ equity section.
The fair value of the stock options granted is based on an independent actuary’s valuation report calculated using the Black-Scholes option pricing model.
ah. Earnings Per Share
Earnings per share is calculated by dividing the consolidated net profit at end of year with the weighted average number of shares issued and fully paid-in during the year.
The weighted-average number of outstanding shares used in computing diluted earnings per share has been adjusted to reflect the changes in issued shares as a result of the conversion of share
options Notes 33a and 34.
The weighted-average number of outstanding shares used in computing the diluted earnings per share as at 31 December 2010, 2009 and 2008 are 20,993,040,798 shares, 20,961,252,565 shares
and 20,929,439,763 shares, respectively.
2010 2009
2008
The weighted-average shares - Basic
20,979,785,635 20,939,650,256
20,874,991,622 Adjustment on dilutive common shares:
MSOP - Stage I -
4,225,205 MSOP - Stage II
2,726,799 1,673,871
784,387 MSOP - Stage III
10,528,364 19,928,438
49,438,549
The weighted-average number of outstanding shares – Dilutive
20,993,040,798 20,961,252,565
20,929,439,763
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 546 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
ai. Segment Information
Bank Mandiri and its Subsidiaries have presented financial information by nature of business primary segment and by geographical area secondary segment. A business segment is a
distinguishable component of the Bank that is engaged in providing an individual service or a group of related services and that is subject to risks and returns that are different from those of other
business segments.
A geographical segment is a distinguishable component of the Bank and its Subsidiaries that is engaged in providing services within a particular economic environment and that is subject to risks
and returns that are different from those operating in other economic environments.
The primary segments have been divided into banking, Sharia banking, securities, insurance, financing, remittance and others, while the secondary segments are divided into Indonesia, Asia
Singapore, Malaysia, Hong Kong and Timor Leste, Western Europe England and Cayman Islands.