Foreclosed Properties Summary of Significant Accounting and Financial Reporting Policies

PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2012 and 2011 and January 1, 2011December 31, 2010 and For the Years then Ended December 31, 2012 and 2011 Figures are Presented in Millions of Rupiah, unless Otherwise Stated - 46 -

z. Financial Guarantee Contracts

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss incurred because a specified debtor defaulted to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given from Group to bank, financial institutions and other institutions on behalf of customers to secure loans and other banking facilities. Financial guarantees are initially recognized in the financial statements at fair value on the date the guarantee was given. The fair value of a financial guarantee at inception is likely to equal the premium received because all guarantees are agreed on arm’s length terms and the initial fair value is amortized over the life of the financial guarantees. Subsequently, these contracts are measured at the higher of amortized amount and the present value of any expected payment when a payment under the guarantee has become probable and the difference is charged to other operating expense in the consolidated statement of comprehensive income. aa. Stock Issuance Costs Stock issuance costs are deducted from the additional paid-in capital portion of the related proceeds from issuance of shares and are not amortized. ab. Revenue and Expense Recognition 1. Recognition of Interest Revenues, Interest Expenses, Sharia Revenue, and Revenue Sharing Distribution Interest Revenue and Interest Expenses Interest income and interest expense for all financial instruments are recognized in the consolidated statement of income on accrual basis using the effective interest rate method. Transaction costs that occur and are directly attributable to the acquisition or issuance of financial instruments not measured at fair value through profit and loss are amortized over the life of financial instruments using the effective interest rate method and recorded as part of interest income for financial assets directly attributable transaction costs, and as part of interest expense related to transaction costs of financial liabilities. If a financial asset or group of similar financial assets in the category are held to maturity, loans and receivables, and available for sale are impaired, the interest income earned after the impairment loss is recognized based on the interest rate used for discounting future cash flows in calculating impairment losses. Revenue and ExpenseProfit Sharing Sharia Revenue consists of income from murabahah sharia, income from muntahiyah bittamlik ijarah lease, and from the results of financing. Murabahah and revenue from ijarah muntahiyah bittamlik are recognized over the contract period on an accrual basis. Revenues for the results of financing are recognized when received or within the period of entitlement based on profit sharing portion agreed.