Marketable Securities Issued SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2010, 2009 AND 2008 Expressed in millions of Rupiah, unless otherwise stated Appendix 543 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued ac. Interest Income and Expense continued ii Sharia continued Income from murabahah transaction, which payment is made on installment or deferred, is recognised proportionally, in accordance with generally accepted banking practice Bank Indonesia Letter No. 101260DPbS dated 15 October 2008 and Bank Indonesia Letter No. 9634DPbS dated 20 April 2007. Considering the risk on murabahah receivables, the Subsidiary adopts the following policy in recognising income from murabahah: 1. Murabahah with a deferred payment term of one year or above one year where the risk of cash collection on receivables andor management fee are relatively low risk, the income is recognised using effective method annuity over the contract period. 2. Murabahah with a deffered payment term above than one year, where the risk of cash collection receivables andor management fee and the collection receivable are relatively high risk, the income is recognised using proportionally method over the contract period. Subsidiary determine level of the risk based on internal requirement. Subsidiary will stop the amortisation of deferred income during the financing period when the loan is categorised as non performing. Istishna income is recognised using percentage of completion method or at the end of contract. Ijarah income is recognised proportionally over the contract period. Musyarakah profit sharing income for passive partner is recognised based on an agreed portion in accordance with the financing contract. Mudharabah profit sharing income is recognised in a period where the right of revenue sharing is due based on agreed portion. It is not allowable to recognise the income based on projection. ad. Premium income recognition, Claims and benefits expenses and Unearned premium income Subsidiary’s premium received from short duration insurance contracts is recognised as income over the period of risk coverage in proportion to the amounts of insurance protection provided. Subsidiary’s premiums from long duration contracts are recognised as income when the policy is due. Premiums received before the due date of the respective policies are reported as other liabilities in the consolidated balance sheet. Subsidiary’s claims and benefits consist of settled claims, claims that are still in process of completion and estimated of claims incurred but not yet reported IBNR. Claims and benefits are recognised as expenses when the liabilities to cover claims are incurred. Claim recoveries from reinsurance companies are recognised and recorded as deduction from claims expenses consistent in the same period with the claim expenses recognition. Total claims in process, including claims incurred but not yet reported, are stated at estimated amounts determined based on the actuarial technical insurance calculations. Changes in estimated claims liabilities as a result of further evaluation and the difference between estimated claims and paid claims are recognised as addition to or deduction from expenses in the period the changes occurred. PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2010, 2009 AND 2008 Expressed in millions of Rupiah, unless otherwise stated Appendix 544 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued ad. Premium income recognition, Claims and benefits expenses and Unearned premium income continued Subsidiary’s unearned premium income represents part of the premiums already received but not yet earned, from the outstanding term insurance and supplementary benefit insurance coverage. Unearned premium income is computed in aggregate - at least 40 of own retention premiums in accordance with the Decision Letter of the Minister of Finance of the Republic of Indonesia No. 424KMK.062003. ae. Fees and Commissions Income Since the implementation of SFAS No. 55 Revised 2006 on 1 January 2010, fees and commissions income directly attributable to lending activities, are recognised as a partdeduction of lending cost and will be recognised as interest income by amortising the carrying value of loan with effective interest rate method. Prior to 1 January 2010, significant fees and commissions income that are directly related to lending activities andor involving specific periods are deferred and amortised using the straight-line method over the term of the underlying contract, whilst insignificant fee and commission income are directly recognised when the transaction occurred. The unamortised fees and commissions balances relating to loans settled prior to maturity are recognised upon settlement date. Other fees and commissions income which are not directly related to lending activities or a specific periods are recognised as revenue on the transaction date. af. Employee Benefits Pension Liability Bank Mandiri established a defined contribution pension plan covering substantially all of its eligible employees from 1 August 1999 and also defined benefit pension plans, which were derived from each of the Merged Banks’ pension plan. This program is funded through payment to pension fund management as defined in the regular actuarial calculation. Bank Mandiri and Subsidiaries’ pension liability has been calculated by comparing the benefit that will be received by an employee at normal pension age from the Pension Plans with the benefit as stipulated under the Labor Law No. 132003 after deducting accumulated employee contributions and the results of its investments. If the pension benefit from the Pension Plans is less than the benefit as required by the Labor Law, the Bank and Subsidiaries will have to pay such shortage. The pension plan based on the labor law is a defined benefit plan because the labor law requires a certain formula to calculate the minimum pension benefit. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. The liability recognised in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service cost. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method on a regular basis for periods not exceed one year. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefit will be paid, and that have terms to maturity approximating the terms of the related pension liability.