Acceptance Receivables and Payables

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2011 AND 2010 Expressed in millions of Rupiah, unless otherwise stated Appendix 544 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued ac. Subordinated Loans Subordinated loans are initially measured at fair value plus directly attributable transaction costs. Subsequently transactions costs are amortised using the effective interest rate up to the maturity of subordinated loans. Subordinated loans are classified as financial liabilities at amortised cost. Refer to Note 2c for the accounting policy for financial liabilities at amortised cost. ad. Income Tax The tax expense comprises current and deferred tax. Tax is recognised in the consolidated statement of income statement, except to the extent that it relates to items recognised directly in equity. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Where appropriate it establishes provisions based on the amounts expected to be paid to the tax authorities. The balance sheet liability method is applied to determine income tax expense in Bank Mandiri and Subsidiaries. Under the balance sheet liability method, deferred tax assets and liabilities are recognised for all temporary differences arising between the tax base of assets and liabilities and their carrying amount in the consolidated statement of financial position balance sheet at each reporting date. This method also requires the recognition of future tax benefits, to the extent that realisation of such benefits is probable. Currently enacted or substantially enacted tax rates at the time deferred tax assets has been realised or deferred tax liabilities has been settled are used in the determination of deferred income tax. The changes to the carrying value of deferred tax assets and liabilities due to the changes of tax rates are charged in the current year, except for transactions which previously have been directly charged or credited to shareholders’ equity. Amendments to taxation obligations are recorded when an assessment is received or, if appealed against, when the result of the appeal is determined. Management provides provision for future tax liability at the amount that will be payable to the tax office on probable tax exposure, based on assessment as at the date of consolidated statement of financial position balance sheet. Significant assumptions and estimation used in the provisioning calculation may involve element of uncertainty. The estimated corporate income tax of Bank Mandiri and Subsidiaries is calculated for each company as a separate legal entity. Current tax assets and current tax liabilities for different legal entities can not be set-off in the consolidated financial statements. Corporate tax payables of Bank Mandiri and Subsidiaries are presented as current tax payables in the consolidated statement of financial position balance sheet, whilst other tax payables are presented as obligation due immediately refer to Note 2b.b.i regarding changes in accounting policy. Deferred tax assets are presented net of deferred tax liabilities in the consolidated balance sheets.