Government Bonds Mandiri - Investor Relations - Audited Financials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2012 AND 2011 Expressed in millions of Rupiah, unless otherwise stated Appendix 534 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

o. Loans continued

Loan Restructuring Loan restructuring may involve a modification of the terms of the loans, conversion of loans into equity or other financial instruments andor a combination of both. Losses on loan restructurings in respect of modification the terms of the loans are recognised only if the present value of total future cash receipts specified by the new terms of the loans including both receipts designated as interest and those designated as loan principal, are less than the carrying amount at loans before restructuring. Starting from 1 January 2010, losses on loan restructuring are presented as part of allowance for impairment losses. For loan restructurings which involve a conversion of loans into equity or other financial instruments, a loss on loan restructuring is recognised only if the fair value of the equity or financial instruments received, deducted by estimated expenses to sell the equity or other financial instruments, is less than the carrying amount of loans. Overdue interest, which is capitalised to loans under new restructuring agreements, is recorded as deferred interest income and is amortised proportionately based on the amount of capitalised interest relative to the loan principal upon collection. Losses on loan restructuring are presented as part of allowance for impairment losses.

p. Consumer Financing Receivables

Subsidiary’s consumer financing receivables are recognised initially at fair value, added with directly attributable transaction costs and deducted by yield enhancing income, and subsequently measured at amortised cost using the effective interest rate method. Subsidiary’s consumer financing receivables are classified as loans and receivables. Refer to Note 2c for the accounting policy of loans and receivables. Early termination is treated as a cancellation of an existing contract and the resulting gain or loss is credited or charged to the current year’s consolidated statement of comprehensive income at the transaction date. Subsidiary’s unearned consumer financing income is the difference between total installments to be received from customers and the total financing which is recognised as income over the term of the contract using effective interest rate. Consumer financing receivables are stated net of joint financing receivables where joint financing providers bear credit risk in accordance with its portion without recourse, unearned consumer financing income and allowance for impairment losses. Joint financing receivables where the Subsidiary and joint financing providers bear credit risk in accordance with their portion without recourse are presented on a net basis in the consolidated statement of financial position. Consumer financing income and interest expense related to joint financing without recourse are also presented on a net basis in the consolidated statement of comprehensive income. For joint financing without recourse, Subsidiary has the right to set higher interest rates to customers than those as stated in the joint financing agreements with joint financing providers. The difference is recognised as revenue and disclosed as “Consumer financing income”.