PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2012 and 2011 and January 1, 2011December 31, 2010 and For the Years then Ended December 31, 2012 and 2011
Figures are Presented in Millions of Rupiah, unless Otherwise Stated
- 46 -
z. Financial Guarantee Contracts
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss incurred because a specified debtor defaulted
to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given from Group to bank, financial institutions and other
institutions on behalf of customers to secure loans and other banking facilities. Financial guarantees are initially recognized in the financial statements at fair value on the
date the guarantee was given. The fair value of a financial guarantee at inception is likely to equal the premium received because all guarantees are agreed on arm’s length terms and
the initial fair value is amortized over the life of the financial guarantees. Subsequently, these contracts are measured at the higher of amortized amount and the
present value of any expected payment when a payment under the guarantee has become probable and the difference is charged to other operating expense in the consolidated
statement of comprehensive income.
aa. Stock Issuance Costs
Stock issuance costs are deducted from the additional paid-in capital portion of the related proceeds from issuance of shares and are not amortized.
ab. Revenue and Expense Recognition
1. Recognition of Interest Revenues, Interest Expenses, Sharia Revenue, and Revenue Sharing Distribution
Interest Revenue and Interest Expenses
Interest income and interest expense for all financial instruments are recognized in the consolidated statement of income on accrual basis using the effective interest rate
method. Transaction costs that occur and are directly attributable to the acquisition or issuance
of financial instruments not measured at fair value through profit and loss are amortized over the life of financial instruments using the effective interest rate method and
recorded as part of interest income for financial assets directly attributable transaction costs, and as part of interest expense related to transaction costs of financial liabilities.
If a financial asset or group of similar financial assets in the category are held to maturity, loans and receivables, and available for sale are impaired, the interest income
earned after the impairment loss is recognized based on the interest rate used for discounting future cash flows in calculating impairment losses.
Revenue and ExpenseProfit Sharing Sharia
Revenue consists of income from murabahah sharia, income from muntahiyah bittamlik ijarah lease, and from the results of financing.
Murabahah and revenue from ijarah muntahiyah bittamlik are recognized over the contract period on an accrual basis. Revenues for the results of financing are
recognized when received or within the period of entitlement based on profit sharing portion agreed.
PT SINAR MAS MULTIARTHA Tbk AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements
December 31, 2012 and 2011 and January 1, 2011December 31, 2010 and For the Years then Ended December 31, 2012 and 2011
Figures are Presented in Millions of Rupiah, unless Otherwise Stated
- 47 - 2.
Recognition of Insurance Underwriting Income and Expenses Underwriting Income
Premiums received from short-term insurance contracts are recognized as income within the contract period based on the insurance coverage provided. Premiums
received from long-term insurance contracts are recognized as income when these are due. Premiums received prior to the issuance of insurance policies is recorded as
Policyholders’ deposit. Gross reinsurance premiums are recognized as an expense when payable or on the
date on which the policy is effective. Claims Expenses
Claims consist of settled claims, claims in process, claims incurred but not reported and claims settlement expense. Claims are recognized as expense at the time liabilities
for claims are recognized. A portion of the claims received from reinsurance are recognized and recorded as deduction from claims expenses in the same period when
the claims expenses are recognized. Subrogation rights are recognized as deduction from claims expenses at the time of realization.
Claims in process estimated claims are computed based on estimated loss which at consolidated statements of financial position date are still in process, including claims
incurred but not reported. Commission Expenses
Commission due to insurance brokers, agents and other insurance companies in connection with the insurance coverage are recorded as commission expense,
whereas commissions obtained from reinsurance transactions are recorded as commission income and recognized in the consolidated statements of comprehensive
income when earned.
3. Recognition of Shares Administration, Underwriting and Stock Brokerage Fees and Investment Management Income
Shares administration fees, stock brokerage fees and underwriting fees are recognized as income when the services for trading of securities in the stock exchange and
underwriting activities are performed. Investment management income is recognized based on agreed conditions as stated in
the “Collective Investment Contract”.
4. Recognition of Other Revenue and Expenses
Fees and Commissions Related to Financial Instruments
Commission income and expense fees associated with the acquisition of financial instruments categorized as held to maturity, loans and receivables, and available for
sale, or related to a period of time and that the amount is significant, is recorded as part of the fair value of financial assets or financial liability and amortized over the period
using the effective interest rate. Meanwhile, fees and commissions that are not significant in amounts are recognized as revenue when the revenue is received or
expense at the time of payment.
