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
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued s. Investments in shares
Investments in shares represent long-term investments in non-publicly-listed companies and temporary investments in debtor companies arising from conversion of loans to equity.
Investments in shares in associated company represent ownership interests of 20.00 to 50.00 are recorded using the equity method. Under this method, investments are recorded at cost and
adjusted for the Bank’s proportionate share in the net equity of the investees and reduced by dividends earned starting the acquisition date net of by allowance for impairment losses.
Temporary investment is written-off from the consolidated statement of financial position if it is held for more than 5 years in accordance with Bank Indonesia Regulation No. 72PBI2005 dated
January 20, 2005 on “Asset Quality Ratings for Commercial Banks”, as amended by Bank Indonesia Regulation No. 112PBI2009 dated January 29, 2009. Since October 24, 2012, Group follows Bank
Indonesia Regulation No. 1415PBI2012 dated October 24, 2012 regarding “Asset Quality Rating for Commercial Banks” and Circular Letter of Bank Indonesia No.1528DPNP dated July 31, 2013
regarding Asset Quality Ratings for Commercial Banks.
Investment in shares with ownership below 20.00 are classified as financial assets available for sale. Refer to Note 2c for the accounting policy of financial assets available for sale.
Goodwill is recognised when there is a difference between the acquisition cost and the Bank’s portion of the fair value of identified assets and liabilities at the acquisition date. Goodwill is
presented as other assets. The Bank conducts an assessment of goodwill impairment regularly.
t. Allowance for possible losses on non-earning assets
Non-earning assets of Bank Mandiri and the Subsidiaries consist of repossessed assets, abandoned properties, inter-office accounts and suspense accounts.
The Bank provided an allowance for impairment of collateral confiscated and abandoned property equivalent to different between carrying amount and fair value net of costs to sell. As for the inter-
office account and suspense account, equivalent to different between carrying value and the recovery value.
u. Acceptance receivables and payables
Acceptance receivables are classified as financial assets in loans and receivables category. Refer to Note 2c for the accounting policy of financial assets for loans and receivables.
Acceptance payables are classified as financial liabilities at amortised cost. Refer to Note 2c for the accounting policy for financial liabilities at amortised cost.
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
62
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued v. Other assets
Other assets include accrued income for interest, provision and commissions, receivables, repossessed assets, abandoned properties, inter-office accounts and others.
Repossessed assets represent assets acquired by Bank Mandiri and Subsidiaries, both from auction and non auction based on voluntary transfer by the debtor or based on debtor’s approval to sell the
collateral where the debtor could not fulfil their obligations to Bank Mandiri and Subsidiaries. Repossessed assets represent loan collateral that were taken over as part of loans settlement and
presented in “Other Assets”.
Abandoned properties represent Bank and Subsidiaries’ fixed assets in form of property which were not used for Bank and Subsidiaries’ business operational activity.
Repossessed assets and abandoned properties are presented at their net realisable values. Net realisable value is the fair value of the repossessed assets less estimated costs of liquidating the
repossessed assets. Any excess of the loan balance over the value of the repossessed assets, which is not recoverable from the borrower, is charged to the allowance for impairment losses.
Differences between the estimated realisable value and the proceeds from disposal of the repossessed assets are recognised as current year’s gain or loss at the date of disposal.
Expenses for maintaining repossessed assets and abandoned properties are recognised in the current year’s consolidated statement of profit or loss and other comprehensive income. Any
permanent impairment loss occurred will be charged to the current year’s consolidated statement of profit or loss and other comprehensive income. Refer to Note 2t for changes in accounting policy to
determine impairment losses on repossessed assets and abandoned properties.
w. Obligation due immediately Obligations due immediately are recorded at the time of the obligations occurred from customer or
other banks. Obligation due immediately are classified as financial liabilities at amortised cost.
x. Deposits from customers
Deposits from customers are the funds placed by customers excluding banks with the Bank and Subsidiaries which operate in banking industry based on a fund deposit agreements. Included in this
account are demand deposits, saving deposits, time deposits and other similar deposits.
Demand deposits represent deposits of customers that may be used as instruments of payment, and which may be withdrawn at any time by cheque, Automated Teller Machine card ATM or by
overbooking through bilyet giro or other orders of payment or transfers.
Saving deposits represent deposits of customers that may only be withdrawn over the counter and via ATMs or funds transfers by SMS Banking, Phone Banking and Internet Banking when certain
agreed conditions are met, but which may not be withdrawn by cheque or other equivalent instruments.
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
63
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued x. Deposits from customers continued
Time deposits represent customers deposits that may only be withdrawn after a certain time based on the agreement between the depositor and the Bank. These are stated at amortised cost in the
certificates between the Bank and the holders of time deposits.
Included in demand deposits are wadiah demand and saving deposits. Wadiah demand deposits can be used as payment instruments and can be withdrawn any time using cheque and bilyet giro.
Wadiah demand and saving deposits earn bonus based on BSM’s policy. Wadiah saving and demand deposits are stated at the Subsidiaries’s liability amount.
Deposits from customers are classified as financial liabilities at amortised cost. Incremental costs directly attributable to acquistion of deposits from customers are included in the amount of deposits
and amortised over the expected life of the deposits. Refer to Note 2c for the accounting policy for financial liabilities at amortised cost.
y. Deposits from other banks
Deposits from other banks represent liabilities to local and overseas banks, in the form of demand deposits, saving deposits, inter-bank call money with original maturities of 90 days or less, time
deposits and negotiable certificate of deposits. Deposits from other banks are recorded as liability to other banks.
Included in the deposits from other banks are sharia deposits in form of wadiah deposits, and Certificates Mudharabah Investment Bank SIMA.
Deposits from other banks are classified as financial liabilities at amortised cost. Incremental costs directly attributable to acquisition of deposits from other banks are included in the amount of
deposits and amortised over the expected life of the deposits. Refer to Note 2c for the accounting policy for financial liabilities at amortised cost.
z. Insurance contract
Insurance contracts is a contract under which the insurer accepts significant insurance risk from the policyholders. Significant insurance risk is defined as the possibility of paying significantly more
benefit to the policyholder upon the occurrence of insured event compared to the minimum benefit payable in a scenario where the insured event does not occur. Scenarios considered are those with
commercial substance.
The Subsidiaries issue insurance contracts that accepted siginificant insurance risk from the policyholders. The Subsidiary defines significant insurance risk as the possibility of having to pay
benefits on the occurence of an insured event of at least 10 more than the benefits payable if the insured event did not occur. When an insurance contract does not have significant insurance risk, it
is classified as investment contracts. The Subsidiaries issues insurance contracts for traditional insurance product and investment-linked
insurance product. Both of these products have significant insurance risk. The Subsidiaries’s products are divided into the following main categories:
• Traditional non-participating life insurance, provide protection to cover the risk of death,
accident, critical illness, and health of the insured. The basic sum assured will be paid upon the occurrence of the risks covered.
• Unit-link, is the insurance product with single and regular premium payment which linked to
investment products, which provide a combined benefit of the protection and investment.
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
64
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued z. Insurance contract continued
Once a contract has been classified as an insurance contract, no reclassification is subsequently performed unless the terms of the agreement are later amended. All insurance products issued by
the subsidiary has significant insurance risk.
The Subsidiary unbundles the deposit component of unit-link contract as required by SFAS No. 62 when both the following conditions are met:
- The Subsidiary can measure separately the “deposit” component including any embedded surrender option, i.e. without taking into account the “insurance” component;
- The Subsidiary’s accounting policies do not otherwise require to recognise all obligations and rights arising from the “deposit” component.
The Subsidiary does not separate the deposit component because only one of the above condition is met.
Liability adequacy test Liability adequacy testing is performed at reporting date for contract individually or group of products
determined in accordance with the Subsidiary’s method of acquiring, servicing and measuring the profitability of its insurance contracts.
For life insurance, the liabilities to policyholder in particular the liabilities for future claim is tested to determine whether they are sufficient to cover all related future cash out flow include all guaranteed
benefit and guaranteed additional benefit, non-guaranteed participation benefit feature if any, all expenses for policies issuance and maintainance, as well as reflecting the future cash inflow, i.e.
future premium receipt. The liabilities are calculated based on discounted cash flow basis for all related cash flows i.e. both of cash outflows and cash inflows as mentioned above using a set of
most recent best estimate assumptions set by the Subsidiary’s appointed actuary, included discount rate assumptions, mortalitymorbidity assumptions, lapse assumptions, expense assumptions and
inflation assumptions as well as margin for adverse deviation assumptions. Subsidiary operates in life insurance use Gross Premium Reserve with best estimate and margin for adverse deviation
therefore liability adequacy test is not required. For loss insurance, Subsidiary performs liability adequacy testing on the reporting date by using
present value of future cash flow based on insurance contracts. If the testing shows a deficiency between insurance liabilities carrying amount deducted with
deferred acquisition cost for loss insurance and estimation of future cash flows, the deficiency will be charged in the consolidated statement of profit or loss and other comprehensive income.
Reinsurance The Subsidiaries reinsure a portion of its risk with reinsurance companies. The amount of premium
paid or portion of premium from prospective reinsurance transactions is recognised over the reinsurance contract in proportion with the protection received.
Reinsurance assets include balances expected to be recovered from reinsurance companies for ceded liability for future policy benefits, ceded estimated claim liabilities and ceded unearned
premiums. Recovery amount from reinsurers are estimated in a manner consistent with the liability associated with the reinsured policy.
Subsidiaries present separately reinsurance asset as asset of the insurance liability.
