Financial instruments continued E. Classes of financial instrument continued
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2013 AND 2012
Expressed in millions of Rupiah, unless otherwise stated
Appendix 523 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
Individual impairment calculation
continued
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 de
btors or counterparties’ ability to pay all amounts due according to the contractual terms of the assets being evaluated.
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 losses. 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 comprehensive income.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2013 AND 2012
Expressed in millions of Rupiah, unless otherwise stated
Appendix 524 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
c. Financial instruments continued G. Allowance for impairment losses of financial assets continued