Determination of fair value

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2016 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated 50 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued e. Foreign currency transactions and balances Subsidiaries and overseas branches Bank Mandiri maintains its accounting records in Indonesian Rupiah. For consolidation purposes, the financial statements of the overseas branches and overseas Subsidiaries of Bank Mandiri denominated in foreign currencies are translated into Rupiah based on the following bases: 1 Assets and liabilities, commitments and contingencies - using the Reuters spot rates at the consolidated statement of financial position date. 2 Revenues, expenses, income and losses - using the average middle rates during each month when the transaction occurs. 3 Shareholders’ equity accounts - using historical rates on the date of transaction. 4 Statements of cash flows - using the Reuters spot rates at the reporting date, except for income and loss statement balances which are translated using the average middle rates and shareholders’ equity balances which are translated using historical rates. The differences arising from the translation adjustment is presented as “Differences arising from translation of foreign currency financial statements” under the Shareholders’ Equity section of the consolidated statement of financial position. Transactions and balances in foreign currencies Transactions in currencies other than Rupiah are recorded into Rupiah by using rates on the date of the transactions. At consolidated statement of financial position date, all foreign currencies monetary assets and liabilities are translated into Rupiah using the Reuters spot rates at 4.00 p.m. WIB Western Indonesian Time on December 31, 2016 and 2015. The resulting gains or losses are credited or charged to the current year’s consolidated statements of profit or loss and other comprehensive income. The exchange rates used against the Rupiah at the dates of the consolidated statement of financial position are as follows amounts in full Rupiah: December 31, December 31, 2016 2015 Great Britain Pound Sterling 1Rp 16,555.01 20,439.02 Euro 1Rp 14,175.77 15,056.67 United Stated Dollar 1Rp 13,472.50 13,785.00 Japanese Yen 100Rp 11,507.00 11,452.00 Other foreign currencies are not disclosed as above since it is considered not material in the translation of transaction in foreign currencies of the Bank and Subsidiaries.

f. Transactions with related parties

The Bank and Subsidiaries enter into transactions with parties which are defined as related parties in accordance with Statement of Financial Accounting Standards SFAS No. 7 regarding “Related Party Disclosures” and Regulation of Bapepam and LK No. KEP-347BL2012, dated June 25, 2012 regarding “Financial Statements Presentation and Disclosure of Issuers or Public Companies”. PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2016 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated 51 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued f. Transactions with related parties continued A related party is a person or entity that is related to the entity that prepares its financial statements reporting entity. The related parties are as follows: 1 A person who a has control or joint control over the reporting entity; b has significant influence over the reporting entity; or c the key management personnel of the reporting entity or the parent of the reporting entity. 2 An entity is related to a reporting entity if any of the following: a The entity and the reporting entity are members of the same group; b An entity is an associate or joint venture of the entity; c Both entities are joint ventures from the same third party; d An entity is a joint venture of a third entity and the other entity is an associate of the third entity; e The entity is a post-employment benefit plan for the benefits of employee either from the reporting entity or an entity related to the reporting entity; f The entity is controlled or jointly controlled by a person identified as referred to in point 1; or g A person identified as referred to point 1 letter a has significant influence over the entity or the entitys key management personnel; h The entity is controlled, jointly controlled or significantly influenced by the Government, namely the Minister of Finance or the local governments which are the shareholders of the entity. 3 Parties which are not related parties are as follows: a Two entities simply because they have the same director or key management personnel or because the key management personnel of one entity has significant influence over the other entity; b Two joint venturers simply because they share joint control of a joint venture; c Fund provider, trade unions, public service, and ministry and agencies of government that does not control, jointly control or significantly influence the reporting entity, solely in the execution of normal dealings with the entity; d Customers, suppliers, franchisor, distributor or general agent with whom an entity enter into transaction with significant volumes of business solely because economic dependence due to circumstances. All significant transactions with related parties have been disclosed in Note 55.

g. Cash and cash equivalents

Cash and cash equivalents consist of cash, current accounts with Bank Indonesia and current accounts with other banks and other short term highly liquid investments with original maturities of 3 three months or less since the date of acquisition.

h. Current accounts with Bank Indonesia and other banks

The minimum statutory reserve Current accounts with Bank Indonesia and other banks are classified as loans and receivables. Refer to Note 2c for the accounting policy of loans and receivables.