Cash and cash equivalents

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2016 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated 54

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued l.

Other receivables - trade transactions Other receivables - trade transactions represent receivables resulting from contracts for trade- related facilities given to customers, which will be reimbursed on maturity. Other receivables - trade transactions are classified as financial assets in loans and receivables. Refer to Note 2c for the accounting policy of loans and receivables.

m. Securities purchasedsold under resalerepurchase agreements

Securities purchased under resale agreements are presented as assets in the consolidated statement of financial position at the agreed resale price less unamortised interest income and allowance for impairment losses. The difference between the purchase price and the agreed selling price is treated as deferred unamortised interest income and amortised as income over the period, commencing from the acquisition date to the resale date using the effective interest rate method. Securities purchased under resale agreements are classified as financial assets in loans and receivables. Refer to Note 2c for the accounting policy of financial assets for loans and receivables. Securities sold under repurchase agreements are presented as liabilities in the consolidated statement of financial position 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 2c for the accounting policy for financial liabilities at amortised cost.

n. Derivative receivables and derivative payables

All derivative instruments including foreign currency transactions for funding and trading purposes are recognised in the consolidated statement of financial position 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 as follows: 1. Gain or loss on a derivative contract designated and qualifies 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 current year. 2. The effective portion arising from gain or loss of derivative contracts, designated as a cash flow hedge instruments is reported as other comprehensive income. The hedge ineffective portion is recognised as a gain or loss in the current year.