Placements with Bank Indonesia and Other Banks

PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2008 and 2007 Expressed in millions of Rupiah, unless otherwise stated 23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued k. Derivative Receivables and Derivative Payables All derivative instruments including foreign currency transactions for funding and trading are recognized in the consolidated balance sheet at their fair values. Fair value is determined based on market value, Reuters spot rate at reporting date, discounted cash flow or quoted price by broker of other instrument with similar characteristic. Derivative assets and liabilities are presented at the amount of unrealized gains or losses on derivative contracts, net after provision for possible losses. Gains or losses on derivative contracts are accounted for based on the purpose the Bank has designated upon acquisition as 1 fair value hedge, 2 cash flow hedge, 3 a hedge of a net investment in a foreign operation, and 4 trading instruments, as follows: 1. Gain or loss on a derivative contract designated and qualifying as a fair value hedging instrument, and the gain or loss on the revaluation of hedged assets or liabilities is recognized currently in profit and loss in the same accounting period. Gains or losses arising from such revaluations may be offset. Any difference that arises representing the effect of hedge ineffectiveness is recognized currently in consolidated statement of profit and loss. 2. The effective portion of the gain or loss on a derivative contract designated and qualifying as a cash flow hedging instrument is reported as a component of other comprehensive income under shareholders’ equity. The effect of the hedge ineffectiveness is recognized currently in consolidated statement of profit and loss. 3. Gain or loss on a hedging derivative instrument in a hedge of a net investment in a foreign operation is reported in other comprehensive income as part of the cumulative translation adjustment under shareholders’ equity to the extent it is effective as a hedge. 4. Gain or loss on a derivative contract not designated as a hedging instrument or derivative contract that does not qualify as a hedging instrument is recognized in current year’s consolidated statement of profit and loss.

l. Loans

Loans represent receivables under contracts with borrowers, where borrowers are required to repay their debts with interest after a specified period, and matured trade finance facilities which have not been settled within 15 days. Loans are stated at their outstanding balance less an allowance for possible losses. Syndicated, direct financing and joint financing, and channeling loans are stated at their balances in proportion to the risks borne by the Bank and its Subsidiaries. Included in loans are financing by Bank Syariah Mandiri, a subsidiary, in the form of syariah financing which are making funds available or receivables which have the similar forms such as: a profit sharing transaction in the form of mudharabah and musyarakah b lease transactions in the form of ijarah or lease purchase based on ijarah muntahiya bittamlik c sale and purchase transaction in the form of murabahah, salam and istishna’ d loanborrowing transaction in the form of receivables qardh and e lease transactions in the form of ijarah for multiservice transaction