Placements with Bank Indonesia and Other Banks

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2009, 2008 AND 2007 Expressed in millions of Rupiah, unless otherwise stated Appendix 516 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued m. Loans Loans represent provision of cash or cash equivalent based on agreements 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 loans, direct financing and joint financing, and channeling loans are stated at their outstanding 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 sharia financing which provides funds or cash equivalents, such as: a profit sharing transactions in the form of mudharabah and musyarakah b lease transactions in the form of ijarah or lease purchase based on ijarah muntahiyah bittamlik c sale and purchase transactions in the form of murabahah and istishna d loanborrowing in the form of receivables qardh and e lease transactions in the form of ijarah for multiservice transaction based on agreement or approval between Bank Syariah Mandiri and other parties who have the responsibility to return the funds over a period of time with reward of ujroh, without reward, or profit sharing. Brief explanation for each type of sharia financing is as follows: Mudharabah is a placement of funds from lenders shahibul maal to fund managers mudharib to undertake certain business activity by using profit sharing or net revenue sharing arrangement between both parties based on the ratio nisbah which has been agreed upfront. Musyarakah is a placement of funds by fund owners to jointly place these funds in certain business activity with profit sharing scheme based on previously agreed nisbah. Loss is borne by the fund owners according to proportion in the funds. Ijarah is a leasing arrangement of goods andor services between the owner of a leased object lessor and leasee including the right to use the leased object, for the purpose of obtaining return on the leased object. Ijarah muntahiyah bittamlik is a leasing arrangement between the lessor and the lessee to obtain profit on the leased object being leased with option to transfer ownership of the leased object through purchasesale or giving hibah at certain time according to the lease agreement akad. Murabahah is a financing in the form of salepurchase transaction at cost of the goods plus agreed profit margin. Murabahah receivables are stated at amount of receivables less realisable deferred margin. Murabahah receivables are presented net of allowance for losses. Istishna is a financing in the form of salepurchase of ordered goods with certain agreed criteria and conditions with payment terms in accordance with the agreement. Qardh is a loanborrowing funds without profit wherein the borrower return the principal of the loan at lump sum or on installment over certain period.