PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2015 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued y. Deposits from other banks
Deposits from other banks represent liabilities to local and overseas banks, in the form of demand deposits, saving deposits, inter-bank call money with original maturities of 90 days or less, time
deposits and negotiable certificate of deposits. Deposits from other banks are recorded as liability to other banks.
Included in the deposits from other banks are sharia deposits in form of wadiah deposits, and Certificates Mudharabah Investment Bank SIMA.
Deposits from other banks are classified as financial liabilities at amortised cost. Incremental costs directly attributable to acquisition of deposits from other banks are included in the amount of
deposits and amortised over the expected life of the deposits. Refer to Note 2c for the accounting policy for financial liabilities at amortised cost.
z. Insurance contract
Insurance contracts is a contract under which the insurer accepts significant insurance risk from the policyholders. Significant insurance risk is defined as the possibility of paying significantly more
benefit to the policyholder upon the occurrence of insured event compared to the minimum benefit payable in a scenario where the insured event does not occur. Scenarios considered are those
with commercial substance.
The Subsidiaries issue insurance contracts that accepted siginificant insurance risk from the policyholders. The Subsidiary defines significant insurance risk as the possibility of having to pay
benefits on the occurence of an insured event of at least 10 more than the benefits payable if the insured event did not occur. When an insurance contract does not have significant insurance risk,
it is classified as investment contracts. The Subsidiaries issues insurance contracts for traditional insurance product and investment-
linked insurance product. Both of these products have significant insurance risk. The Subsidiaries’s products are divided into the following main categories:
• Traditional nonparticipating life insurance, provide protection to cover the risk of death,
accident, critical illness, and health of the insured. The basic sum assured will be paid upon the occurrence of the risks covered.
• Unit-linked, is the insurance product with single and regular premium payment which linked to
investment products, which provide a combined benefit of the protection and investment. Once a contract has been classified as an insurance contract, no reclassification is subsequently
performed unless the terms of the agreement are later amended. All insurance products issued by the subsidiary has significant insurance risk.
The Subsidiary unbundles the deposit component of unit-linked contract as required by SFAS No. 62 when both the following conditions are met:
- The Subsidiary can measure separately the “deposit” component including any embedded surrender option, i.e. without taking into account the “insurance” component;
- The Subsidiary’s accounting policies do not otherwise require to recognise all obligations and rights arising from the “deposit” component.
The Subsidiary does not separate the deposit component because only one of the above condition is met.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2015 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued z. Insurance contract continued
Liability adequacy test Liability adequacy testing is performed at reporting date for contract individually or group of
products determined in accordance with the Subsidiary’s method of acquiring, servicing and measuring the profitability of its insurance contracts.
For life insurance, the liabilities to policyholder in particular the liabilities for future claim is tested to determine whether they are sufficient to cover all related future cash out flow include all
guaranteed benefit and guaranteed additional benefit, non-guaranteed participation benefit feature if any, all expenses for policies issuance and maintainance, as well as reflecting the future cash
inflow, i.e. future premium receipt. The liabilities are calculated based on discounted cash flow basis for all related cash flows i.e. both of cash outflows and cash inflows as mentioned above
using a set of most recent best estimate assumptions set by the Subsidiary’s appointed actuary, included discount rate assumptions, mortalitymorbidity assumptions, lapse assumptions, expense
assumptions and inflation assumptions as well as margin for adverse deviation assumptions. Subsidiary operates in life insurance use Gross Premium Reserve with best estimate and margin
for adverse deviation therefore liability adequacy test is not required. For loss insurance, Subsidiary performs liability adequacy testing on the reporting date by using
present value of future cash flow based on insurance contracts. If the testing shows a deficiency between insurance liabilities carrying amount deducted with
deferred acquisition cost for loss insurance and estimation of future cash flows, the deficiency will be charged in the consolidated statement of profit or loss and other comprehensive income.
Reinsurance The Subsidiaries reinsure a portion of its risk with reinsurance companies. The amount of premium
paid or portion of premium from prospective reinsurance transactions is recognised over the reinsurance contract in proportion with the protection received.
Reinsurance assets include balances expected to be recovered from reinsurance companies for ceded liability for future policy benefits, ceded estimated claim liabilities and ceded unearned
premiums. Recovery amount from reinsurers are estimated in a manner consistent with the liability associated with the reinsured policy.
Subsidiaries present separately reinsurance asset as asset of the insurance liability. If a reinsurance asset is impaired, the Subsidiaries deducted the carrying amount accordingly and
recognises that impairment loss in the consolidated statement of profit or loss and other comprehensive income. A reinsurance asset is impaired if there is objective evidence, as a result
of an event that occurred after initial recognition of the reinsurance asset, that the Subsidiary may not receive all amounts due to it under the terms of the contract, and the impact on the amounts
that the Subsidiary will receive from the reinsurer can be reliably measured.
