PT BANK MANDIRI PERSERO AND SUBSIDIARIES
Notes to the Consolidated Financial Statements Continued December 31, 2002 and 2001
Expressed in millions of Rupiah, unless otherwise stated
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143
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62. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES
FOLLOWED BY THE BANK “INDONESIAN GAAP” AND INTERNATIONAL ACCOUNTING STANDARDS “IAS” Continued
b. Allowance for Possible Losses on Earning Assets Under Indonesian GAAP, the Bank records allowances for possible losses on earning assets
using a general and specific allowance based on management’s estimates and using the guidelines prescribed by Bank Indonesia.
Under IAS, the Bank records allowances for possible losses on earning assets that are not considered impaired using general and specific allowances in accordance with the provisions of
IAS No. 37 – “Estimated Liabilities, Contingent Liabilities and Contingent Assets” from January 1, 2000.
Under IAS No. 39 – “Financial Instruments: Recognition and Measurement”, from January 1, 2001, the Bank calculates allowances for possible losses on earning assets based on the net
present value of earning assets that are impaired and based on the expected collection of other earning assets. An earning asset is considered impaired when it becomes probable that the
Bank will be unable to collect all amounts due according to contractual terms.
c. Derivative instruments Under Indonesian GAAP, the Bank adopted SFAS No. 55 – “Accounting for Derivative
Instruments and Hedging Activities” that is effective from January 1, 2001 which requires that derivative instruments be measured and recognized at their fair values. Such values for
Indonesian Banks are further defined under the reporting guidelines prescribed by Bank Indonesia and are based on the value of derivative instruments determined based on the
Reuters spot rate at reporting date. Under IAS No. 39 – “Financial Instruments: Recognition and Measurement”, from January 1,
2001 the Bank calculates the fair values of derivative instruments based on forward rates of exchange.
The Bank classifies Government bonds Note 8 as originated loans under IAS and therefore no separate measurement and recognition is required for indexation derivatives that are embedded
in the hedge bonds. Originated loans are characterized by assets for which the Bank provided the original funding and are not determined by the form of the instrument that results from the
loan origination.
d. Employee Benefits In accordance with the Decree of the Minister of Manpower No.Kep-150Men2000 “KEPMEN
150” dated June 20, 2000, regarding the “Settlement of Labour Dismissal and the Stipulation of Severance Pay, Gratuity and Compensation in Companies”, the Bank recognizes a provision for
employee entitlements based on actuarial reports. In accordance with SFAS No. 57 – “Provisions, Contingent Liabilities and Contingent Assets”, no specific actuarial method is
mandated. The Bank however applies the projected unit credit valuation method and the simplified actuarial valuation method as of December 31, 2002 and 2001, respectively.
Under IAS, KEPMEN 150 is accounted for as a defined benefit plan and as such it requires the actuary to use the projected unit credit method of actuarial valuation as mandated by IAS 19 –
“Employee Benefits”. Further, changes in the amount of the actuarially determined provision for KEPMEN 150 does not require recognition, unless the change is more than a 10 corridor
range of variation.
PT BANK MANDIRI PERSERO AND SUBSIDIARIES
Notes to the Consolidated Financial Statements Continued December 31, 2002 and 2001
Expressed in millions of Rupiah, unless otherwise stated
-
144
-
62. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES
FOLLOWED BY THE BANK “INDONESIAN GAAP” AND INTERNATIONAL ACCOUNTING STANDARDS “IAS” Continued
e. Provisions Under Indonesian GAAP, the Bank recognized provisions for merger as of January 1, 2000.
Upon adoption of SFAS No. 57 – “Provisions, Contingent Liabilities and Contingent Assets”, effective January 1, 2001, certain of the provisions for merger did not meet this standard’s
recognition criteria and were derecognised accordingly.
Under IAS, the Bank did not recognize certain of the provisions for merger as of January 1, 2000 in accordance with the provisions of IAS No. 37-“Estimated Liabilities, Contingent
Liabilities and Contingent Assets” that have been reflected as an adjustment to accumulated losses as of that date.
f. Allowance for Possible Losses on Commitments and Contingencies Under Indonesian GAAP, the Bank records allowances for possible losses on commitments and
contingencies using a general and specific allowance based on management’s estimates and using the guidelines prescribed by Bank Indonesia.
Under IAS, the Bank did not recognize certain of the allowance for possible losses on commitments and contingencies in accordance with the provisions of IAS No. 37-“Estimated
Liabilities, Contingent Liabilities and Contingent Assets” from January 1, 2000.
g. Deferred Income Taxes The impact on deferred income taxes of the IAS adjustments has been recognized in
accordance with IAS 12 – “Income Taxes”. An effective tax rate of 30 has been applied.
63. COMPARABILITY OF IAS AS OF DECEMBER 31, 2002 AND 2001 AND FOR THE YEARS THEN ENDED
In 1998, the Standing Interpretations Committee issued SIC-8 “First-time Application of IAS as the Primary Accounting Basis” that allows application of IAS based on transitional provisions of each
standard. The Bank has followed this guidance in the preparation of its reconciliation of net income and shareholders’ equity to the amounts determined under IAS Note 64. This may result in
comparability differences between years for accounting standards that are not electively applied retroactively or do not permit retroactive application.
In December 1998, the International Accounting Standards Setting Committee issued IAS No. 39 – “Financial Instruments: Recognition and Measurement” that, for the Bank, is effective on a
prospective basis only. The adoption of IAS No. 39 has a material impact on certain financial assets and liabilities. The transition adjustment comprised of adjustments to investments held to maturity,
allowances for possible losses on earning assets and derivative instruments, and the related corporate income tax, that is reflected as an adjustment to accumulated losses as of January 1,
2001.
