PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2009, 2008 AND 2007
Expressed in millions of Rupiah, unless otherwise stated
Appendix 518 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued n. Consumer Financing Receivables
Consumer financing receivables are stated at their outstanding balance less the portion of joint financings where the credit risk is assumed by joint financing providers in accordance with the
financings portion without recourse, unearned consumer financing income and the allowance for possible losses.
Unearned consumer financing income, which is the difference between the total installment payments to be received from consumers and the principal amount of consumer financing, and is
recognised as earned income over the term of the contract based on a constant rate of return on the net consumer financing receivables.
Administration income from consumers is recognised in the consolidated statement of income upon signing the financing contract.
Early termination of a contract is treated as a cancellation of an existing contract and the resulting gain or loss is credited or charged to the current year’s consolidated statement of income at the
date of transaction.
o. Joint Financing
Joint financing consists of with and without recourse joint financing to end-user consumers. The consumer financing receivables under joint financing where each party assumes the credit risk
according to the risk portion without recourse are stated at net amount in the consolidated balance sheet. Consumer financing income and interest expense related to without recourse joint
financing are stated at net amount in the consolidated statement of income. Consumer financing receivables under joint financing where the Subsidiary assume the credit risk with recourse are
stated at gross amount in the consolidated balance sheet. The consumer financing income and interest expense related to with recourse joint financing are stated at gross amount in the
consolidated statement of income.
For joint financing without recourse, Subsidiary has the right to set higher interest rates to customers than those as stated in the joint financing agreements with joint financing providers
which is the Bank. The difference is recognised as revenue and disclosed as “Consumer Financing Revenue”.
p. Acceptance Receivables and Payables
Acceptance receivables and payables are stated at the value of the letters of credit or realisable value of the letters of credit accepted by the accepting bank. Acceptance receivables are presented
net of allowance for possible losses.
q. Investments in Shares
Investments in shares represent long-term investments in non-publicly-listed companies an d 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 under 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 since the acquisition date net of by allowance for possible losses.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2009, 2008 AND 2007
Expressed in millions of Rupiah, unless otherwise stated
Appendix 519 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued q. Investments in Shares continue
Temporary investments in debtor companies arising from the conversion of loans to equity are accounted for under the cost method regardless of the percentage of ownership, less an allowance
for possible losses.
All other investments are carried at cost less an allowance for possible losses. Changes in value of investments in subsidiaries which is caused by changes in the subsidiaries’
equity and is not a transaction between the Bank and the Subsidiaries, is recognised as part of the equity as “Difference in Transactions of Equity Changes in Subsidiaries”. This account will be
calculated in determining the parent companies’ profit and loss at the disposal of the investment Note 32e.
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 exchange date. Goodwill is
presented as other assets and amortised as expense over the period using the straight-line method, unless there is other method considered more appropriate in certain conditions. The Goodwill
amortisation period is 5 five years, but a longer amortisation period may be applied with maximum 20 years period with appropriate basis.
r. Allowance for Possible Losses on Earning and Non-Earning Assets
Earning assets consist of current accounts with Bank Indonesia and other banks, placements with Bank Indonesia and other banks, marketable securities, Government Bonds, other receivables -
trade transactions, securities purchased under resale agreements, derivative receivables, loans, consumer financing receivables, acceptance receivables, investments in shares and commitments
and contingencies with credit risk and earning assets from sharia activities.
Commitments and contingencies with credit risk consist of outstanding irrevocable letters of credit, outstanding letters of credit under Bank Indonesia’s guarantee program, guarantees issued in the
form of standby letters of credit, bank guarantees, and risk sharing.
Non-earning assets are Bank Mandiri and the Subsidiaries’ assets with potential loss including repossessed assets, abandoned properties, inter-office accounts and suspense accounts.
In accordance with Bank Indonesia BI regulations, Bank Mandiri and Subsidiaries classify earning assets into one of five categories and non earning assets into one of four categories. Performing
assets are categorised as “Current” and “Special Mention”, while non-performing assets are categorised into three categories: “Sub-Standard”, “Doubtful” and “Loss”. Non earning assets are
divided into “Current”, “Sub-Standard”, “Doubtful” and “Loss”. Marketable securities classified as “Current”, “Substandard” and “Loss”.
Mandiri Tunas Finance, a subsidiary, provides an allowance for doubtful accounts based on an assessment of the collectibility of outstanding receivables with reference to historical loss
experience or when there is objective evidence that the outstanding receivables will probably not be collected. Doubtful accounts are written off when they are overdue for more than 180 days or
determined to be not collectible. Recoveries from written off receivables are recognised as other income upon receipt.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2009, 2008 AND 2007
Expressed in millions of Rupiah, unless otherwise stated
Appendix 520 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued r.
Allowance for Possible Losses on Earning and Non-Earning Assets continued
The classification of earning assets and the minimum amount of allowance for possibles losses on assets and commitments and contingencies with credit risk is calculated based on Bank Indonesia
Regulation PBI No. 72PBI2005 dated 20 January 2005 regarding Asset Quality Rating for Commercial Banks, as last amended by PBI No. 112PBI2009 dated 29 January 2009. In
connection with the implementation of PBI No. 72PBI2005, the Bank determined the classification of earning assets based on the evaluation of the management on each borrower’s financial
performance, business prospects and ability to repay.
For Sharia Banks, the classification of earning assets is determined based on Bank Indonesia Regulation No. 821PBI2006 dated 5 October 2006 regarding Earning Assets Quality of
Commercial Banks Conducting Business Based on Sharia Principles as several articles has been amended by PBI No. 99PBI2007 dated 18 June 2007.
The minimum allowance amounts in accordance with the Bank Indonesia Regulation are as follows: Percentage of minimum allowance
Current 1
Special Mention 5
Substandard 15
Doubtful 50
Loss 100
The above percentages are applied to earning assets and commitments and contingencies less the collateral value, except for earning assets and commitments and contingencies categories as
Current, where the rates are applied directly to the outstanding balances.
No provision should be provided for earning assets in Certificates of Bank Indonesia and Government Bonds and for earning assets which are guaranteed with cash collateral such as
current accounts, time deposits, savings, margin deposits, gold, Certificates of Bank Indonesia or Government Debenture Debt, Government Guarantees in accordance with the regulations, standby
letters of credit from prime bank, which are issued in accordance with Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication No. 600 UCP
600 and International Standard Banking Practices ISBP.
For marketable securities, in accordance with Bank Indonesia Regulation No. 72PBI2005 dated 20 January 2005 on “Asset Quality Ratings for Commercial Banks”, the minimum allowance are as
follows:
Percentage of minimum allowance Current
1 Substandard
15 Loss
50 The estimated loss on commitments and contingencies with credit risk is presented in the liabilities
section of the consolidated balance sheets.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2009, 2008 AND 2007
Expressed in millions of Rupiah, unless otherwise stated
Appendix 521 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued r.
Allowance for Possible Losses on Earning and Non-Earning Assets continued
The outstanding balances of earning assets classified as loss are written off against the respective allowance for possible losses when the management of Bank Mandiri and Subsidiaries believes that
the earning assets are uncollectible. Recoveries of earning assets previously written off are recorded as an addition to the allowance for possible losses during the year. If the recovery
exceeds the principal amount, the excess will be recognised as interest income.
In accordance with Bank Indonesia Regulation No. 72PBI2005 dated 20 January 2005 on “Asset Quality Ratings for Commercial Banks”, starting from 20 January 2006, the Bank is also required to
make a special allowance for possible losses on non-earning assets, such as repossessed assets, abandoned properties, interbranch accounts and suspense accounts.
This regulation classifies repossessed assets and abandoned properties into the following classification:
Period Current
Up to 1 year Substandard
More than 1 year up to 3 years Doubtful
More than 3 years up to 5 years Loss
More than 5 years The classification for interbranch and suspense accounts are as follows:
Period Current
Up to 180 days Loss
More than 180 days
s. Fixed Assets and Leased Assets
i. Fixed assets Prior to 1 January 2008, fixed assets are stated at cost except for certain fixed assets that were
revalued in 1979, 1987 and 2003 in accordance with Government regulations less accumulated depreciation except for land which is not depreciated. The corresponding revaluation increments
were credited to “Fixed Assets Revaluation Reserve” under the shareholders’ equity in the consolidated balance sheets.
Effective 1 January 2008, Bank Mandiri applied SFAS No. 16 revised 2007, “Fixed Assets”, which supersedes SFAS No. 16 1994, “Fixed Assets and Other Assets”, and SFAS No. 17
1994, “Accounting for Depreciation”. Bank Mandiri and subsidiaries chose the cost model, and therefore, the balance of fixed assets revaluation reserve at the first time SFAS No. 16 revised
2007 was presented in shareholders’ equity section in the consolidated balance sheet, were reclassified to consolidated retained earnings in 2008 Note 32c.
Fixed assets except for land is stated at cost less accumulated depreciation and impairment losses. Such cost includes the cost of replacing part of the fixed assets when that cost is incurred,
if the recognition criteria are met. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the fixed assets as a replacement if the recognition criteria
are satisfied. All other repairs and maintenance costs that do not have future economics benefit are recognised in the consolidated statement of income as incurred.
