Factoring Receivables Summary of Significant Accounting and Financial Reporting Policies

PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements For the Years Ended December 31, 2014 and 2013 Figures are Presented in Millions of Rupiah,unless Otherwise Stated If a financial asset or group of similar financial assets in the category are held to maturity, loans and receivables, and available for sale are impaired, the interest income earned after the impairment loss is recognized using the interest rate used for discounting future cash flows in calculating impairment losses. Revenue and ExpenseSharia Profit Sharing Revenue consists of income from murabahah sharia, income from muntahiyah bittamlik ijarah lease, and profit sharing from mudharabah financing. Murabahah and revenue from ijarah muntahiyah bittamlik are recognized over the contract period on an accrual basis. Revenues for the results of financing are recognized when received or within the period of entitlement based on profit sharing agreement. Expense based on sharia consists of profit sharing expense of mudharabah, wadiah bonus expense and profit sharing expense of Certificate of Sharia Interbank Mudharabah Investment. 2. Recognition of Insurance Underwriting Income and Expenses Underwriting Income Premiums on insurance contracts short-term period contracts are recognized as revenue over the policy contract period in proportion to the insurance coverage provided. Premiums on long-term insurance contracts are recognized as revenue on due date of policyholders. Premiums received prior to the issuance of insurance policies is recorded as Policyholders’ deposit AJSM and deferred premium income ASM. Gross reinsurance premiums are recognized as an expense when payable or on the effective date of the policy. Claims Expense Claims consist of settled claims, claims in process, claims incurred but not reported and claims settlement expense. Claims are recognized as expense when the obligation to settle the claims incurred. The portion of claims received from reinsurance are recognized and recorded as deduction from claims expenses in the same period when the claims expenses are recognized. Subrogation rights are recognized as deduction from claims expenses at the time of realization. Claims in process estimated claims are computed based on estimated loss which at consolidated statements of financial position date are still in process, including claims incurred but not reported. Commission Expense Commission due to insurance brokers, agents and other insurance companies in connection with the insurance coverage are recorded as commission expense, whereas commissions obtained from reinsurance transactions are recorded as commission income and recognized in the consolidated statements of comprehensive income when earned. - 41 - PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements For the Years Ended December 31, 2014 and 2013 Figures are Presented in Millions of Rupiah,unless Otherwise Stated 3. Recognition of Securities Administration, Underwriting and Stock Brokerage Fees and Investment Management Income Securities administration fees, stock brokerage fees and underwriting fees are recognized as income when the services for trading of securities in the stock exchange and underwriting activities are performed. Investment management income is recognized based on agreed conditions as stated in the “Collective Investment Contract”. 4. Recognition of Other Revenue and Expenses Fees and Commissions Related to Financial Instruments Commission income and expense fees associated with the acquisition of financial instruments categorized as held to maturity, loans and receivables, and available for sale, or related to a period of time and that the amount is significant, is recorded as part of the fair value of financial assets or financial liability and amortized over the term of the financial instrument period using the effective interest rate method. Meanwhile, fees and commissions that are not significant in amounts are recognized as revenue when the revenue is received or expense at the time of payment. Other Fees and Commission Fees and commissions that are significant in amount and are not related to the issuance or acquisition of financial instruments and have maturity terms are treated as deferred income or expenses and amortized using the straight-line method over the term of the relevant transaction. Other fees and commission revenues not related to credit, such as banca assurance services, and revenues associated with import and export bank guarantee, are recognized as revenue associated with the services provided. Other Income and Expense Income from assets for lease operating lease is recognized using the straight-line method over the lease period Note 2k. Administration income incurred in relation with lease, consumer finance, and factoring transaction are recognized when earned. Other income expense are recognized when earned incurred and in accordance with their beneficial period accrual basis. ac. Employee Benefits Short-term employee benefits liability Short-term employee benefits are in form of wages, salaries, and other employee benefits and bonuses. Short-term employee benefits are recognized at its undiscounted amount as a liability after deducting any amount already paid in the consolidated statement of financial position and as an expense in the consolidated statement of comprehensive income. - 42 -