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
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued z. Insurance contract continued
Unexpired Risk Reserve URR A liability for contractual benefits that are expected to be incurred in the future is recorded when the
premiums are recognised. The liability is determined as the sum of the expected discounted value of the benefit payments and the future administration expenses that are directly related to the
insurance contract, less the expected discounted value of the theoretical premiums that would be required to meet the benefits and administration expenses based on the valuation assumptions used
the valuation premiums. The liability is based on assumptions as to mortality, persistency, maintenance expense and investment income that are established at the time the contract is issued.
A margin for adverse deviations is included in the assumptions.
aa. Marketable securities issued Marketable securities issued by the Bank and its Subsidiaries, include bonds, subordinated notes,
medium term notes and travellers’ cheques, are initially measured at fair value plus directly attributable transaction costs. Subsequently transactions costs are amortised using the effective
interest rate up to the maturity of marketable securities issued.
Marketable securities issued are classified as financial liabilities at amortised cost. Refer to Note 2c for the accounting policy for financial liabilities at amortised cost.
ab. Fund borrowings
Fund borrowings represent funds received from other banks, Bank Indonesia or other parties with the obligation of repayment in accordance with the requirements of the loan agreement.
Fund borrowings are initially measured at fair value minus directly attributable transaction costs. Fund borrowings are classified as financial liabilities at amortised cost. Refer to Note 2c for the
accounting policy for financial liabilities at amortised cost.
ac. Subordinated loans
Subordinated loans are initially measured at fair value minus directly attributable transaction costs. Subsequently transactions costs are amortised using the effective interest rate up to the maturity of
subordinated loans. Subordinated loans are classified as financial liabilities at amortised cost. Refer to Note 2c for the
accounting policy for financial liabilities at amortised cost. ad. Income tax
Bank Mandiri and Subsidiaries applies SFAS No. 46 Revised 2014 “Income Tax” which required Bank Mandiri and Subsidiaries to account for the current and future recovery settlement of the
carrying amount of assets liabilities that are recognised in the consolidated statement of financial position; and transactions and other events of the current period.
The tax expense comprises current and deferred tax. Tax is recognised in the consolidated statement of profit or loss and other comprehensive income, except to the extent that it relates to
items recognised directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
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
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued ad. Income tax continued
Group’s management periodically evaluates the implementation of prevailing tax regulations especially those that are subject to further interpretation on its implementation, including evaluation
on tax assessment letters received from tax authorities. Where appropriate the Bank establishes provisions based on the amounts expected to be paid to the tax authorities.
Bank Mandiri and subsidiaries applies the balance sheet liability method to determine income tax expense. Under the balance sheet liability method, deferred tax assets and liabilities are recognised
for all temporary differences arising between the tax base of assets and liabilities and their carrying amount in the consolidated statement of financial position at each reporting date. This method also
requires the recognition of future tax benefits, to the extent that realisation of such benefits is probable.
Deferred tax assets are recognised if there is probable future that taxable income will be sufficient to compensate deferred tax assets arising on the temporary differences.
Deferred tax is calculated using tax rates enacted or substantively applied to the period during which the asset is realized or the liability is settled. The changes to the carrying value of deferred tax
assets and liabilities due to the changes of tax rates are charged in the current year, except for transactions which previously have been directly charged or credited to equity.
Amendments to taxation obligations are recorded when an assessment is received or, if appealed against, when the result of the appeal is determined. Management provides provision for future tax
liability at the estimated amount that will be payable to the tax office if there is a probable tax exposure, based on management’s assessment as of the date of consolidated statement of financial
position. Assumptions and estimation used in the provisioning calculation may involve element of uncertainty.
The estimated corporate income tax of Bank Mandiri and Subsidiaries is calculated for each company as a separate legal entity. Current tax assets and current tax liabilities for different legal
entities can not be set-off in the consolidated financial statements. Corporate tax payables and other tax payables of Bank Mandiri and Subsidiaries are presented as taxes payable in the consolidated
statement of financial position. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable
entity or different taxable entities where there is an intention to settle the balances on a net basis.
ae. Temporary syirkah funds
Temporary syirkah funds represent investment received by a Subsidiary. The Subsidiary has the right to manage and invest funds in accordance with either the Subsidiary’s policy or restriction set
by the depositors with the agreed profit sharing. Relationship between the Subsidiary and the owner of temporary syirkah funds are based on
partnership mudharabah muthlaqah, mudharabah muqayyadah or musyarakah. The examples of temporary syirkah funds are investment funds received from mudharabah muthlaqah, mudharabah
muqayyadah, mudharabah musytarakah and other similar accounts. 1 Mudharabah muthlaqah represents mudharabah in which the fund owner shahibul maal
entrusts to fund manager mudharibSubsidiary in managing its investment.
