SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
v. Other Main Operating Incom e
Other main operating income consists of income derived from Bank Indonesia Sharia Certificates, placements with other sharia banks and profit sharing from sharia securities. Other main operating income is recognized upon collection (cash basis).
w. Third Parties' Share on Returns of Tem porary Syirkah Funds
The share of third parties in the returns of temporary syirkah funds represent the share of third parties in the revenues of the Bank derived from the management of such funds, which is based on mudharabah mutlaqah principles. The income that is shared is income collected (cash basis).
The Bank uses revenue sharing as a means of distributing profits to fund owners. Margin income and profit sharing on financing facilities and other earning assets for distribution
to fund owners and the Bank are computed proportionally based on the fund participation of fund owners and the Bank which was used in the channeling of financing facilities and other earning assets. Margin income and profit allocated to the fund owners are distributed to fund owners as shahibul maal and the Bank as mudharib based on a predetermined ratio. Margin income and profit sharing from financing facilities and other earning assets using the Bank's funds, are entirely for the Bank, including income from the Bank's fee-based transactions.
x. Sources and Uses of Zakah, Infaq and Shadaqah Fund and Qardhul Hasan Fund
The management of sources and uses of zakah, infaq and shadaqah fund, and qardhul hasan fund is delegated to Zakah Management Board (Lembaga Amil Zakat) of Bank Syariah Mandiri Ummat and the Bank does not require reports on the result of the management of the fund.
y. Fee and Com m ission Incom e
Fee and commission income, which are directly related to financing activities or loans, are recognized as income at the transaction date.
z. Pension Plan and Em ployee Benefits
Pension Plan The Bank has a defined contribution pension plan covering all of its employees under the age of 56 years old. Contributions consist of the employees and the Bank's contributions at 5% and 10% of the employees net basic salary. Contributions made by the Bank are charged to current operations.
Employees Benefits Plan The Bank recorded employee service entitlements as stipulated under the Indonesian Law No.13/2003 (the labor law). In accordance with PSAK 24 (revised 2004), the Projected Unit Credit Method has been adopted to determine the employee benefits and past service costs. The statement has changed the accounting standard.
Based on PSAK 24 (revised 2004), the employee service entitlements would be immediately recognized, except for actuarial gains (losses) and non-vested cost. The accumulated difference between actuarial gains (losses), being more than 10% from the present value would be amortized over the average remaining service. But, the actuarial gains (losses) arising from service provided by an active employee after retirement would immediately be recognized.
aa. Transactions and Balances in Foreign Currencies
Transactions in foreign currencies are recorded in Rupiah based on the rates of exchange prevailing at the time the transactions are made. A contract to trade one currency with another is named Sharf. As of December 31, 2008 and 2007, monetary assets and liabilities in foreign currencies are translated into Rupiah based on Reuter's published spot rate at 16.00 pm (west Indonesian local time) at that date, as follows (in full amount):
Euro 1 15,356 13,822 United States Dollar 1
10,900 9,393 Australian Dollar 1
7,554 8,266 Singapore Dollar 1
7,588 6,533 Saudi Arabia Riyal 1
2,856 2,504 Japanese Yen 1
84 The resulting gains or losses are credited or charged to current operations. Foreign currency transactions of the Sharia bank (excluding bank notes) can be conducted for
purpose of hedging only. The bank is not allowed to enter foreign currency transactions for speculative purposes. The difference between the agreed rate in the contract and the cash rate (mark to market) at the date of delivery is recognized as gain or loss at the time of delivery or withdrawal of the fund.
ab. Segment Inform ation
PSAK No. 5 (revision of 2000) on "Segment Reporting" requires the Bank to identify and disclose financial information based on the Bank's business and geographical segment. The Bank presents financial information based on geographical segment.
ac. Income Tax
The Bank applies the liabilities method to determine its income tax expense. Under the liability method, deferred tax assets and liabilities are recognized for temporary differences between the financial and the tax bases of assets and liabilities at each reporting date. This method also requires the recognition of future tax benefits, to the extent that realization of such benefits is probable.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assets are realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Amendments to tax obligations are recorded when an assessment is received or, if appealed against by the Bank, when the result of the appeal is determined.
ad. Basic Earning Per Share
Basic earning per share is calculated by dividing the income for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding is 111,648,713 and 71,674,513 (full amount) shares as of December 31, 2008 and 2007 respectively.
ae. Use of Estim ates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimations and assumptions that affect amounts reported therein. Due to inherent uncertainty in making estimates, actual results reported in future periods might be based on amounts, which differ from those estimated.