Marketable Securities Issued continued

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.