Cash and Cash Equivalents

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 531 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

l. Securities PurchasedSold under ResaleRepurchase Agreements continued

Prior to 1 January 2010, the difference between the purchase price and the resale price is treated as deferred unamortised interest income and amortised as income over the period, commencing from the acquisition date to the resale date by using straight-line method. Securities sold under repurchase agreements are presented as liabilities in the consolidated balance sheet at the agreed repurchase price net of the unamortised prepaid interest. The difference between the selling price and the agreed repurchase price is treated as prepaid interest and recognised as interest expense over the period, commencing from the selling date to the repurchase date using effective interest rate method. Securities sold under repurchase agreements are classified as financial liabilities at amortised cost. Refer to Note 2b for the accounting policy for financial liabilties at amortised cost. Prior to 1 January 2010, the difference between the selling price and the repurchase price is treated as prepaid interest and is recognised as an expense over the period, commencing from the selling date to the repurchase date by using straight-line method.

m. Derivative Receivables and Derivative Payables

All derivative instruments including foreign currency transactions for funding and trading purposes are recognised in the consolidated balance sheet at their fair values. Fair value is determined based on market value using Reuters rate at reporting date or discounted cash flow method. Derivative receivables are presented at the amount of unrealised gain from derivative contracts, less allowance for impairment losses. Derivative payables are presented at the amount of unrealised loss from derivative contracts. Gains or losses from derivative contracts are presented in the consolidated financial statements based on its purpose designated upon acquisition, as 1 fair value hedge, 2 cash flow hedge, 3 net investment in a foreign operation hedge, and 4 trading instruments. 1. Gain or loss on a derivative contract designated and qualifying as a fair value hedging instrument and the gain or loss arising from the changes in fair value of hedged assets and liabilities is recognised as gain or loss that can be set off one another during the same accounting periodyear. Any difference representing hedge ineffectiveness is directly recognised as gain or loss in the consolidated statement of income in current year. 2. The effective portion arising from gain or loss of derivative contracts, which are both designated and qualify as a cash flow hedge instruments is reported as other comprehensive income, a separate component under the equity section. The hedge ineffectiveness portion is recognised as a gain or loss in the current year consolidated statement of income. 3. Gain or loss arising from derivative contract that is designated, qualifies as a net investment hedge in a foreign operation and that is highly effective is reported as other comprehensive income, a separate component under the equity section. 4. Gain or loss arising from derivative contract not designated as a hedging instrument or derivative contract that does not qualify as a hedging instrument is recognised in the current year consolidated statement of income.