NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2012 AND 2011
Expressed in millions of Rupiah, unless otherwise stated
Appendix 524 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 In evaluating impairment for loans, the Bank determines loan portfolio into these three
categories: 1.
Loans which individually have significant value and if impairment occurred will have material impact to the consolidated financial statements, i.e. loans with Gross Annual
Sales GAS Corporate and Commercial, as well as loans with GAS outside Corporate and Commercial with outstanding balance more than Rp5,000;
2. Loans which individually have no significant value, i.e. loans with GAS Business, Micro
and Consumer with outstanding balance is less or equal to Rp5,000; and 3.
Restructured loans. Bank determines loans to be evaluated for impairment through individual evaluation if one of
the following condition is met: 1.
Loans which individually have significant value and objective evidence of impairment; or 2.
Restructured loans which individually have significant value. Bank determines loans to be evaluated for impairment through collective evaluation if one of
the following condition is met: 1.
Loans which individually have significant value and there are no objective evidence of impairment; or
2. Loans which individually have insignificant value; or
3. Restructured loan which individually have insignificant value.
Individual impairment calculation The amount of the loss is measured as the difference between the financial asset’s carrying
amount and the present value of estimated future cash flows excluding future impairment losses that have not been incurred discounted at the financial asset’s original effective
interest rate. The carrying amount of the asset is reduced through the allowance for impairment losses account and the amount of the loss is recognised in the consolidated
statement of comprehensive income. If a loan or held-to-maturity financial assets has a variable interest rate, the discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract.
The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for
obtaining and selling the collateral, whether or not foreclosure is probable.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2012 AND 2011
Expressed in millions of Rupiah, unless otherwise stated
Appendix 525 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 Individual impairment calculation continued
The Bank uses a fair value of collateral method as a basis for future cash flow if, one of the following conditions is met:
1. Loans are collateral dependent, i.e. if source of loans repayment comes only from the
collateral; or 2.
Foreclosure of collateral is most likely to occur and supported with legal binding aspect. Collective impairment calculation
For the purpose of a collective evaluation of impairment, financial asset are grouped on the basis of similar credit risk characteristics such by considering credit segmentation and past-
due status. Those characteristics are relevant to the estimation of future cash flows for groups of such assets which indicate debtors or counterparties’ ability to pay all amounts
due according to the contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk
characteristics similar to those in the Bank. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect
the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist.
The Group uses statistical model analysis methods, namely roll rates analysis method and migration analysis method for financial assets impairment which collectively assessed, using
at the minimum of 3 three years historical data.
In migration analysis method, management determines 12 months as the estimated and identification period between a loss occuring for each identified portfolio, except for Micro
banking segment in which the loss identification period used 9 months.
When a loan is uncollectible, it is written off against the related allowance for loan impairment losses. Such loans are written off after all the necessary procedures have been
completed and the amount of the loss has been determined. Impairment charges relating to loans and marketable securities in held-to-maturity and loans and receivables categories
are classified into “Allowance for impairment losses”.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised such
as an improvement in the debtor’s credit rating, the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the impairment reversal is
recognised in the consolidated statement of comprehensive income.
