Consumer Financing Receivables 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 538 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

r. Fixed Assets and Leased Assets continued

ii. Leased assets continued Under an operating lease, the Bank recognise lease payments as an expense on a straight-line basis over the lease term. If a rental agreement contains elements of land and buildings, the Bank assessed the classification of each element as a finance lease or an operating lease separately.

s. Investments in Shares

Investments in shares represent long-term investments in non-publicly-listed companies and temporary investments in debtor companies arising from conversion of loans to equity. Investments in shares representing ownership interests of 20.00 to 50.00 are accounted for using the equity method. Under this method, investments are stated at cost and adjusted for the Bank’s proportionate share in the net equity of the investees and reduced by dividends earned starting the acquisition date net of by allowance for impairment losses. Temporary investment is written-off from the consolidated statement of financial position if it is held for more than 5 years in accordance with Bank Indonesia Regulation No. 72PBI2005 dated 20 January 2005 on “Asset Quality Ratings for Commercial Banks”, as amended by Bank Indonesia Regulation No. 112PBI2009 dated 29 January 2009. Since 24 October 2012, Group follows Bank Indonesia Regulation No. 1415PBI2012 dated 24 October 2012 regarding “Asset Quality Rating for Commercial Banks”. Investment in shares with ownership below 20 are classified as financial assets available for sale. Refer to Note 2c for the accounting policy of financial assets available for sale. Goodwill is recognised, when there is a difference between the acquisition cost and the Bank’s portion of the fair value of identified assets and liabilities at the acquisition date. Goodwill is presented as other assets. The Bank conducts an assesment of goodwill impairment regulary.

t. Allowance for Possible Losses on Non-Earning Assets

Non-earning assets of Bank Mandiri and the Subsidiaries consist of repossessed assets, abandoned properties, inter-office accounts and suspense accounts. The Bank provided an allowance for impairment of collateral confiscated and abandoned property equivalent to different between carrying amount and fair value net of costs to sell. As for the inter- office account and suspense account, equivalent to different between carrying value and the recovery value.

u. Acceptance Receivables and Payables

Acceptance receivables are classified as loans and receivables financial assets. Refer to Note 2c for the accounting policy of loans and receivables. Acceptance payables are classified as financial liabilities at amortised cost. Refer to Note 2c for the accounting policy for financial liabilities at amortised cost.