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 541 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
y. Marketable Securities Issued continued
Prior to 1 January 2010, marketable securities issued are stated at nominal value less unamortised discount. Costs incurred in connection with the issuance of marketable securities issued is
recognised as a discount and is deducted directly from the proceeds of issuance marketable securities issued and amortised on a straight-line method until the maturity date.
z. Fund Borrowings
Fund borrowings represent funds received from other banks, Bank Indonesia or other parties with the obligation of repayment in accordance with the requirements of the loan agreement.
Fund borrowings are initially measured at fair value plus directly attributable transaction costs. Fund borrowings are classified as financial liabilities at amortised cost. Refer to Note 2b for the
accounting policy for financial liabilities at amortised cost.
Prior to 1 January 2010, fund borrowings were stated at the amount payable to the lender.
aa. 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 2b for the
accounting policy for financial liabilities at amortised cost. Prior to 1 January 2010, subordinated loans are stated at nominal value less unamortised discount.
Costs incurred in connection with the issuance of subordinated loans is recognised as a discount and is deducted directly from the proceeds of subordinated loans issuance and amortised on a
straight-line method until the maturity date.
ab. Income Tax
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 balance sheets 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.
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. Deferred tax assets are presented net of deferred tax liabilities in the consolidated balance sheets.
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 542 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
ac. Interest Income and Expense
i Conventional Interest income and expense for all interest-bearing financial instruments are recognised within
“interest income” and “interest expense” in the consolidated statement of income using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate,
a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual
terms of the financial instrument but does not consider future credit losses. The calculation includes all fees, commissions and other fees received between parties to the contract that are
an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised on the non-impaired portion of the impaired
financial assets using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
Prior to 1 January 2010 Interest income and expense are recognised on an accrual basis. Interest income on loans or
other earning assets that are classified as non-performing is recognised only to the extend that the interest is received in cash. When a financial asset is classified as non-performing, any
interest income previously recognised but not yet collected is reversed against interest income. The reversed interest income is recognised as a contingent receivable.
Cash receipts from loans that are classified as doubtful or loss are first applied to the loan principal. The excess of cash receipts over loan principal is recognised as interest income in the
statements of income.
Interest income from restructured loan is recognised only to the extent that interest is received in cash, before the loan’s quality become current as determined by Bank Indonesia Regulation
No. 72PBI2005 dated 20 January 2005 regarding Asset Quality Rating for Commercial Banks, as amended by Bank Indonesia Regulation No. 112PBI2009 dated 29 January 2009.
Interest receivable on non-performing assets of Bank Mandiri and its Subsidiaries is recorded as contingent receivables in the Commitment and Contingency statement in the notes to the
consolidated financial statements.
Subsidiaries’ consumer financing income is presented net of with consumer financing income for other banks in relation with channeling transactions, joint financing cooperations, factoring,
and the appointment as manager of accounts receivable.
ii Sharia Included in interest income and expense are sharia income and expense. The Bank’s income
as a fund manager mudharib consist of income from sale and purchase on murabahah transaction, income from istishna, rent income ijarah and income from profit sharing from
mudharabah and musyarakah financing as well as other main operating income.
