SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued ai. Employee benefits continued

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2016 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated 74 3. USE OF CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS continued Key sources of estimation uncertainty continued

c. Pension programs

Pension programs are determined based on actuarial valuation. The actuary valuation involves making assumptions about discount rate, expected rate of return on investments, future salary increases, mortality rate, resignation rate and others refer to Note 2ai and 50. Any changes in those assumptions will impact the liability balance of employee benefit obligations. The Group determines the appropriate discount rate at the end of each year including interest rate that should be used to determine the present value of estimated future cash outflows expected to settle the pension obligations. In determining the appropriate discount rate, the Group considers the interest rates of Government Bonds denominated in the similar currency with payments that will be made and have terms to maturity approximating the terms of the related employee benefit liability. Other key assumptions for pension obligations are determined based in part on current market conditions.

d. Insurance liabilities on insurance contracts

Technical reserves of subsidiaries recorded in the consolidated statement of financial position as part of Other liabilities are calculated based on actuarial calculation using certain actuarial assumptions which are the best estimate assumption and margin for any adverse deviations. Included in the technical reserves are liability for future policy benefits, estimated claim liabilities, unearned premium income, Unexpired Risk Reserve URR and liability to policyholders.

e. Deferred tax assets

Deferred tax assets are recognised for all deductible temporary differences, as long as it is likely that taxable income will be available so that the temporary differences can be used. Significant estimates by management is required in determining the amount of deferred tax assets that can be recognised, based on current usage and the level of taxable income and future tax planning strategies. Banks do not take into account some of the benefits of deferred tax assets as management believes that deferred tax assets will not be recoverable in the future.

f. Depreciation and estimated useful life of fixed assets

Cost of acquisition of fixed assets are depreciated using the straight-line method based on their estimated economic useful life. Bank management estimates the useful lives of the assets between 5 five to 20 twenty years. Changes in the level of usage and technological developments could affect the economic useful lives and residual value of assets, and therefore future depreciation charges may be revised. The carrying value of Bank’s fixed assets is disclosed in Note 18.

g. Impairment of non-financial assets

Bank Mandiri and its subsidiaries assess impairment of non-financial assets whenever events or changes in circumstances indicate that the carrying value of non-financial assets cannot be recovered. Important factors that could cause impairment of non-financial assets are as follows: a Performance is not achieved significantly against expectations of historical or projected operating results in the future; b A significant change in the way the use of the asset or the overall business strategy; and c Industry or economic trends are significantly negative. PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2016 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated 75 3. USE OF CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS continued Key sources of estimation uncertainty continued

g. Impairment of non-financial assets continued

Management of the Bank and its Subsidiaries recognize an impairment loss if the carrying amount of the asset exceeds its recoverable amount. Recoverable amount is the higher value between the fair value minus costs of disposal with the use value of the asset or cash-generating unit. Recoverable amount is estimated for individual assets or, if not possible, for the cash-generating unit in which the asset forming part of the unit.

h. Revaluations of land

The group engaged independent valuation specialists to assess fair value for revalued land. Lands were valued by reference to market-based evidence, using comparable prices adjusted for specific market factors such as location and condition of land. Significant accounting judgements Accounting judgements that are important in applying accounting policies of the Bank and its Subsidiaries include:

a. Going Concern

The Management of the Bank and its Subsidiaries has assessed the ability of the Bank and its Subsidiaries to continue its business and believes that the Bank and Subsidiaries have the resources to continue their business in the future. In addition, management is not aware of any material uncertainties that may cause significant doubt on the ability of the Bank and Subsidiaries to maintain its viability. Therefore, the consolidated financial statements have been prepared on the basis of a going concern.

b. Classification of financial assets and liabilities

Management of the Bank and its Subsidiaries determined the classification of certain assets and liabilities as financial assets and financial liabilities by considering whether the definitions set SFAS No. 55 Revised 2014 have been met. Accordingly, financial assets and financial liabilities are recognised in accordance with the accounting policy of the Bank and its Subsidiaries as disclosed in Note 2.c.E.

4. CURRENT ACCOUNTS WITH BANK INDONESIA December 31, December 31,

2016 2015 Rupiah 41,014,055 44,557,520 United States Dollar Note 61B.v 11,470,919 11,756,796 52,484,974 56,314,316 As of December 31, 2016 and 2015, the Bank’s Minimum Statutory Reserve complies with Bank Indonesia BI Regulation No. 1515PBI2013 regarding Minimum Statutory Reserve of Commercial Banks in Rupiah and Foreign Currencies which has been amended with No. 183PBI2016 dated March 10, 2016 and No. 1814PBI2016 dated August 18, 2016, which are as follows: