Other Assets SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2010, 2009 AND 2008 Expressed in millions of Rupiah, unless otherwise stated Appendix 541 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

y. Marketable Securities Issued continued

Prior to 1 January 2010, marketable securities issued are stated at nominal value less unamortised discount. Costs incurred in connection with the issuance of marketable securities issued is recognised as a discount and is deducted directly from the proceeds of issuance marketable securities issued and amortised on a straight-line method until the maturity date.

z. 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 plus directly attributable transaction costs. Fund borrowings are classified as financial liabilities at amortised cost. Refer to Note 2b for the accounting policy for financial liabilities at amortised cost. Prior to 1 January 2010, fund borrowings were stated at the amount payable to the lender. aa. Subordinated Loans Subordinated loans 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 subordinated loans. Subordinated loans are classified as financial liabilities at amortised cost. Refer to Note 2b for the accounting policy for financial liabilities at amortised cost. Prior to 1 January 2010, subordinated loans are stated at nominal value less unamortised discount. Costs incurred in connection with the issuance of subordinated loans is recognised as a discount and is deducted directly from the proceeds of subordinated loans issuance and amortised on a straight-line method until the maturity date. ab. Income Tax The balance sheet liability method is applied to determine income tax expense in Bank Mandiri and Subsidiaries. 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 balance sheets at each reporting date. This method also requires the recognition of future tax benefits, to the extent that realisation of such benefits is probable. Currently enacted or substantially enacted tax rates at the time deferred tax assets has been realised or deferred tax liabilities has been settled are used in the determination of deferred income tax. 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 shareholders’ equity. Amendments to taxation obligations are recorded when an assessment is received or, if appealed against, when the result of the appeal is determined. 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. Deferred tax assets are presented net of deferred tax liabilities in the consolidated balance sheets.