PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003, April 30, 2003 and December 31, 2002 Expressed in millions of Rupiah, unless otherwise stated
171
62. SUBSEQUENT EVENTS continued
f. Repayment Proposal on Subordinated Loan of PT Bank Syariah Mandiri, a subsidiary of the Bank, from Bank Indonesia.
On March 9, 2004, PT Bank Syariah Mandiri has submitted a proposal in relation with the settlement of subordinated loan from BI, through its letter No. 6105DIR dated March 9, 2004.
63. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE BANK “INDONESIAN GAAP” AND INTERNATIONAL FINANCIAL REPORTING
STANDARDS “IFRS” The accompanying consolidated financial statements have been prepared in accordance with
Indonesian GAAP, which varies in certain significant respects from IFRS. The significant differences relate to the items in the following paragraphs:
a. Allowance for Possible Losses on Earning Assets Under Indonesian GAAP, the Bank records allowances for possible losses on earning assets using
general and specific allowances based on management’s estimates and using the guidelines prescribed by Bank Indonesia.
Under IFRS, the Bank records allowances for possible losses on earning assets that are not considered impaired using general and specific allowances in accordance with the provisions of
IAS No. 37 - “Estimated Liabilities, Contingent Liabilities and Contingent Assets”.
Under IAS No. 39 - “Financial Instruments: Recognition and Measurement”, the Bank calculates allowances for possible losses on earning assets based on the net present value of earning assets
that are impaired and based on the expected collection of other earning assets. An earning asset is considered impaired when it becomes probable that the Bank will be unable to collect all
amounts due according to contractual terms.
b. Allowance for Possible Losses on Commitments and Contingencies Under Indonesian GAAP, the Bank records allowances for possible losses on commitments and
contingencies using general and specific allowances based on management’s estimates and using the guidelines prescribed by Bank Indonesia.
Under IFRS, the Bank does not recognize certain of the allowances for possible losses on commitments and contingencies in accordance with the provisions of IAS No. 37-“Estimated
Liabilities, Contingent Liabilities and Contingent Assets”. c. Derivative instruments
Under Indonesian GAAP, the Bank applies SFAS No. 55 - “Accounting for Derivative Instruments and Hedging Activities” which requires that derivative instruments be measured and recognized at
their fair values. As of April 30, 2003 and December 31, 2002, the fair value of the foreign currency forward transactions has been determined based on Reuters spot rates at the reporting
dates in accordance with the reporting guidelines prescribed by Bank Indonesia. On October 23, 2003, Bank Indonesia issued a letter to amend the guidelines and waived the requirement to use
spot rates of exchange to revalue foreign currency forward contracts.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003, April 30, 2003 and December 31, 2002 Expressed in millions of Rupiah, unless otherwise stated
172
63. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE BANK “INDONESIAN GAAP” AND INTERNATIONAL FINANCIAL REPORTING
STANDARDS “IFRS” continued The accompanying consolidated financial statements have been prepared in accordance with
Indonesian GAAP, which varies in certain significant respects from IFRS. The significant differences relate to the items in the following paragraphs continued:
c. Derivative instruments continued Under IAS No. 39 - “Financial Instruments: Recognition and Measurement”, the Bank calculates
the fair values of foreign currency forward derivative instruments based on forward rates of exchange.
The Bank classifies Government Bonds Note 8 as originated loans under IFRS and therefore no separate measurement and recognition is required for indexation derivatives that are embedded in
the hedge bonds. Originated loans are characterized by assets for which the Bank provided the original funding and are not determined by the form of the instrument that results from the loan
origination.
d. Employee Benefits Under Indonesian GAAP, the Bank recognized a provision for employee entitlements under
KepMen 150 and UU no. 132003 equal to the present value of the obligation as determined by actuarial reports in accordance with SFAS No. 57 - “Estimated Liabilities, Contingent Liabilities and
Contingent Assets”.
Under IFRS, KepMen 150 and UU no. 132003 is accounted for as a defined benefit plan and as such it requires the actuary to use the projected unit credit method of actuarial valuation as
mandated by IAS 19 - “Employee Benefits”. Further, under IFRS, past service cost is recognized on a straight-line basis over the average period until the benefits become vested and any actuarial
gainloss resulting from differences between actuarial assumptions and what has actually occurred and changes in actuarial assumptions does not require amortization unless the change is more
than a 10 corridor range of variation, in which event such excess is amortized over the remaining working lives of the employees.
As mentioned in Note 42, the Bank has evaluated the effect of UU No. 132003 on its consolidated financial statements and amended its policy related to employee benefits and service
entitlements from KepMen 150 to UU No. 132003. For Indonesian GAAP, the difference between the benefit obligations in accordance with KepMen 150 and the benefit obligations under UU No.
132003 is recognized in 2003 statements of profit and loss. For IFRS, changes in benefit obligations are treated as negative past service costs which are amortized over the vesting period
of the reduced benefits.
e. Loans Purchases from IBRA Under Indonesian GAAP, the difference between the outstanding loan principal and purchase price
is booked as deferred income if the Bank enters into a new credit agreement with the borrower, and as an allowance for possible losses if the Bank does not enter into a new credit agreement
with the borrower. The allowance for loan losses or deferred income is only adjusted once the Bank has recovered the original purchase price.
Under IFRS, the difference between outstanding loan principal and purchase price is booked as deferred income for all loans purchased from IBRA. For performing loans, the deferred income is
accreted into income over the life of the loan using the effective interest rate method in accordance with IAS No. 39 - “Financial Instruments: Recognition and Measurement”. For non-performing
loans, the deferred income is only adjusted once the Bank has recovered the original purchase price.
