Marketable Securities Mandiri - Investor Relations - Audited Financials

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2012 AND 2011 Expressed in millions of Rupiah, unless otherwise stated Appendix 533 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

o. Loans continued

Brief explanation for each type of sharia financing is as follows: Mudharabah financing is a co-operation for certain project between first party malik, shahibul mal or Subsidiary as owner of fund and second party amil, mudharib or debtors as fund manager whereas the profit sharing will be shared in accordance with percentage as stated in the agreement, meanwhile losses will be borne by the Subsidiary except if the second party does negligence, error or violate the agreement. Mudharabah financing is stated at the outstanding financing balance less allowance for possible losses. Musyarakah financing is a co-operation between two or more parties in a certain business wherein each party provides a portion of fund on condition that the profit shall be shared in the agreement, whereas losses shall be borne in accordance with the portion of the fund of each party. Musyarakah financing is stated at the outstanding financing balance less allowance for possible losses. Ijarah receivables are the financing on the availability of fund in relation to transferring the right to use and benefit of a good and service based on rental transaction which was not followed by transfer of the goods ownership to the lessee. Ijarah muntahiyah bittamlik is an agreement on the availability of fund in relation to transferring the use right and benefit of a good or service based on rental transaction with an option to transfer the ownership title of goods to the lessee. Ijarah receivables are recognized at due date at the amount of it lease income not yet received and presented at its net realizable value, which is the outstanding balance of the receivables. Murabahah receivables are the financing such goods by confirming purchase price to a buyer and the buyer pays it with a higher price as an agreed profit. Murabahah receivables are stated at the balance of the receivable less deferred margin and allowance for possible losses. Istishna receivables are the financing such goods in the form of manufacturing the ordered goods with the agreed criteria and specification by both of orderer or buyer Mustashni and manufacturer or seller Shani. Istishna receivables are presented based on the outstanding billings less allowance for possible losses. Qardh receivables are a borrowing at the condition that the borrower should repay the loan at specified period of time. The Subsidiary will obtain a free ujrah from this transaction, which is recognized upon receipt. Qardh receivables is stated at its outstanding balance less allowance for possible losses. Rahn represent the mortgage of goods or assets owned by the customer for an equivalent amount of money. Assets or goods mortgaged are appraised based on market value, less a certain deduction percentage. The Subsidiary will obtain a fee ujrah, which is recognized upon receipt. On 16 January 2013, Islamic Accounting Standards Boards of Indonesian Institute of Accountants DSAS-IAI has issued Technical Bulletin No. 9 to standardize the implementation of annuity method in murabahah. Based on Technical Bulletin No. 9 murabahah financing are fund distribution from syariah financial institution to debtors through trading mechanism. In accounting, this transactions substantially classified as financing. Accounting treatment for financing are refer to SFAS 50 Revised 2010, SFAS 55 Revised 2011, SFAS 60 and other relevant SFAS. Currently the Subsidiary is evaluating and has not determined the impacts of this Technical Bulletin on its financial statements. Loans are classified as financial assets in loans and receivables. Refer to Note 2c for the accounting policy of loans and receivables. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2012 AND 2011 Expressed in millions of Rupiah, unless otherwise stated Appendix 534 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

o. Loans continued

Loan Restructuring Loan restructuring may involve a modification of the terms of the loans, conversion of loans into equity or other financial instruments andor a combination of both. Losses on loan restructurings in respect of modification the terms of the loans are recognised only if the present value of total future cash receipts specified by the new terms of the loans including both receipts designated as interest and those designated as loan principal, are less than the carrying amount at loans before restructuring. Starting from 1 January 2010, losses on loan restructuring are presented as part of allowance for impairment losses. For loan restructurings which involve a conversion of loans into equity or other financial instruments, a loss on loan restructuring is recognised only if the fair value of the equity or financial instruments received, deducted by estimated expenses to sell the equity or other financial instruments, is less than the carrying amount of loans. Overdue interest, which is capitalised to loans under new restructuring agreements, is recorded as deferred interest income and is amortised proportionately based on the amount of capitalised interest relative to the loan principal upon collection. Losses on loan restructuring are presented as part of allowance for impairment losses.

p. Consumer Financing Receivables

Subsidiary’s consumer financing receivables are recognised initially at fair value, added with directly attributable transaction costs and deducted by yield enhancing income, and subsequently measured at amortised cost using the effective interest rate method. Subsidiary’s consumer financing receivables are classified as loans and receivables. Refer to Note 2c for the accounting policy of loans and receivables. Early termination is treated as a cancellation of an existing contract and the resulting gain or loss is credited or charged to the current year’s consolidated statement of comprehensive income at the transaction date. Subsidiary’s unearned consumer financing income is the difference between total installments to be received from customers and the total financing which is recognised as income over the term of the contract using effective interest rate. Consumer financing receivables are stated net of joint financing receivables where joint financing providers bear credit risk in accordance with its portion without recourse, unearned consumer financing income and allowance for impairment losses. Joint financing receivables where the Subsidiary and joint financing providers bear credit risk in accordance with their portion without recourse are presented on a net basis in the consolidated statement of financial position. Consumer financing income and interest expense related to joint financing without recourse are also presented on a net basis in the consolidated statement of comprehensive income. For joint financing without recourse, Subsidiary has the right to set higher interest rates to customers than those as stated in the joint financing agreements with joint financing providers. The difference is recognised as revenue and disclosed as “Consumer financing income”.