Financial instruments continued G. Allowance for impairment losses of financial assets continued

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013 Expressed in millions of Rupiah, unless otherwise stated Appendix 526 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

c. Financial instruments continued G. Allowance for impairment losses of financial assets continued

a Financial assets carried at amortised cost continued Allowance for possible posses on earning assets of Sharia’s Subsidiary 1. Subsidiary evaluate whether there is an objective evidence the financial assets or group of financial assets are impaired at each statement of financial position date as a result of an event occurred after initial recognition which impact the estimated future cash flows that can be reliably estimated. Impairment is recognised as allowance and charged to the statement of consolidated comprehensive income current year. For the collective impairment, as allowed under SFAS 102 Revised 2013, Bank Indonesia’s circular letter No, 1526Dpbs dated 10 July 2013 and Otoritas Jasa Keuangan OJK No. S-129PB.132014 dated 6 November 2014, for the first adoption the Subsidiary could apply transition rule for collective impairment in accordance with prevailing Bank Indonesia’s regulation, The transition rule can be applied at the latest 31 December 2014. 2. Directly attributable income and expenses are recognised using the initial effective interest rate used to discount the future cash flow of the assets. Before 1 January 2014, Subsidiary engaged in sharia business calculated allowance for possible losses of earning assets in accordance with Bank Indonesia Regulation PBI No. 821PBI2006 dated 5 October 2006 regarding The Quality Rating of assets of Commercial Banks Conducting Business Based on Sharia principles, which has been amended with PBI No. 99PBI2007 dated 18 June 2007, PBI No. 1024PBI2008 dated 16 October 2008 and the latest amendment PBI No. 1313PBI2011 dated 24 March 2011, as follows: a. General reserve shall be no less than 1 of total earning asset classified as Current; b. Specific reserve shall be at least: - 5 of earning assets classified as Special Mention after deducted by collateral value; - 15 of earning assets classified as Substandard after deducted by collateral value; - 50 of earning assets classified as Doubtful after deducted by collateral value; - 100 of earning asset classified as Loss after deducted by collateral value. c. The requirement to establish allowance for possible losses shall not be applicable for ijarah leasing or ijarah muntahi’yah bittamlik. b Financial assets classified as available for sale The Group assesses at each date of the consolidated statements of financial position whether there is objective evidence that a financial asset or a group of financial assets is impaired. Refer to Note 2c.G.a for the criteria of objective evidence of impairment. PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013 Expressed in millions of Rupiah, unless otherwise stated Appendix 527 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

c. Financial instruments continued G. Allowance for impairment losses of financial assets continued