Basis of Preparation of the Consolidated Financial Statements lanjutan

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 AND 2013 Expressed in millions of Rupiah, unless otherwise stated Appendix 518 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

c. Financial instruments continued A. Financial assets continued

c Held-to-maturity financial assets Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group has the positive intention and ability to hold to maturity, other than: - those that the Group upon initial recognition designates as at fair value through profit or loss; - those that the Group designates as available for sale; and - those that meet the definition of loans and receivables. Held-to-maturity financial assets are initially recognised at fair value including transaction costs and subsequently measured at amortised cost, using the effective interest method. Interest income on held-to-maturity financial assets is included in the consolidated statement of comprehensive income and reported as “Interest income”. In the case of impairment, the impairment loss is reported as a deduction from the carrying value of the investment and recognised in the consolidated financial statements as “Allowance for impairment losses”. d Available-for-sale financial assets Available-for-sale financial assets are financial assets that are intended to be held for indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or that are not classified as loans and receivables, held- to-maturity or financial assets at fair value through profit or loss. Available-for-sale financial assets are initially recognised at fair value, plus transaction costs, and measured subsequently at fair value with gains or losses arising from the changes in fair value being other comprehensive income, except for impairment losses and foreign exchange gains or losses for debt instrument. For equity instrument, foreign exchange gains or losses is recognised in the consolidated profit or loss, until the financial assets is derecognised. If an available-for-sale financial asset is determined to be impaired, the cumulative unrealised gain or loss arising from the changes in fair value previously recognised as other comprehensive income is recognised in the consolidated profit or loss. Interest income is calculated using the effective interest method. Recognition The Bank uses trade date accounting for regular way contracts when recording marketable securities and Government Bonds transactions. Financial assets that are transferred to a third party but not qualify for derecognition are presented in the consolidated statement of financial position as “receivables from assets pledged as collateral”, if the transferee has the right to sell or repledge them.