PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2005 and 2004 Expressed in millions of Rupiah, unless otherwise stated
19
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
g. Securities continued The value of securities is stated based on the classification of the securities, as follows:
1 Trading securities are stated at fair value. The unrealized gainslosses resulting from the
increasedecrease in fair value are recognized in the current year’s profit and loss. Upon the sale of securities in a trading portfolio, the difference between selling price and fair value per books is
recognized as a realized gain or loss on sale. 2 Available for sale securities are stated at fair value. Unrealized gainslosses resulting from the
increasedecrease in fair value are not recognized in the current year’s profit and loss but are presented as a separate component of shareholders’ equity. Gainslosses are recognized in profit
and loss upon realization. 3 Held to maturity securities are stated at cost adjusted for unamortized discounts or premiums.
For securities which are actively traded in organized financial markets, fair value is generally determined by reference to quoted market bid prices by the stock exchanges at the close of business
on the balance sheet date, adjusted for transaction costs necessary to realize the assets. For securities where there is no quoted market price, a reasonable estimate of the fair value is determined
by reference to the current market value of another instrument which is substantially the same or is calculated based on the expected cash flows of the underlying net asset base of securities. Any
permanent decline in the fair value of securities held to maturity and available for sale is charged to profit and loss in the year incurred.
Purchase and sale of securities transactions both for the customer and for the Bank are recognized in the consolidated financial statements when there is an agreement on securities transactions.
Securities are stated net of allowance for possible losses and unamortized interestpremium or discount. Premiums and discounts are amortized using the straight-line method.
Securities are derecognized from the balance sheet after the Bank has transferred all significant risk and rewards of the related securities.
h. Government Recapitalization Bonds Government Recapitalization Bonds represent bonds issued by the Government in connection with the
recapitalization of commercial banks. Government Recapitalization Bonds are stated based on the classification of the bonds, which accounting treatment is similar to those of securities as described in
Note 2g above, except for hedge bonds which are stated at values determined by the exchange rate of the Rupiah against the US Dollar, as published by Reuters on the balance sheet date. The exchange
gain or loss arising from the indexation of hedge bonds is charged to the current year’s profit and loss.
For Government Recapitalization Bonds which are traded, fair value is generally determined by reference to quoted market bid prices by Bloomberg’s and the stock exchanges on the balance sheet
date. For Government Recapitalization Bonds where there are no quoted market prices, a reasonable estimate of the fair value is calculated using the yield-to-maturity approach.
Government Recapitalization Bonds was derecognized from the balance sheet after the Bank has transferred all significant risk and rewards of the related Government Recapitalization Bonds.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2005 and 2004 Expressed in millions of Rupiah, unless otherwise stated
20
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
