Annual Report 2020

1021 PT Bank Rakyat Indonesia (Persero) Tbk. Performance Highlights Management Reports Company Profile Management Discussion & Analysis Corporate Governance Corporate Social Responsibility Annual Report 2020 These consolidated financial statements are originally issued in the Indonesian language. PT BANK RAKYAT INDONESIA (PERSERO) Tbk AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2020 and for the Year Then Ended (Expressed in millions of Rupiah, unless otherwise stated) 74 2. SUMMARY OF ACCOUNTING POLICIES (continued) ao. Changes in accounting policies and disclosures (continued) Impairment of financial asset value SFAS No. 71 introduces an Expectation Credit Loss model (expected credit loss impairment model) that is more forward-looking in measuring the loss of value of financial instruments. Unlike the SFAS 55 which recognizes credit losses at the time of credit loss events occur, the method introduced by SFAS 71 requires each Bank's reporting date to assess whether credit risk for financial instruments has increased significantly from initial recognition using reasonable and fair supported forward-looking information. The Expectation Credit Loss model is also applied to certain loan commitments and financial collateral contracts, and does not apply to equity instruments. Transition Changes in accounting policy because of SFAS adoption No. 71 has been applied retrospectively, with the following exceptions: • Comparative period is not represented. The difference between the carrying value of a financial asset as a effect of SFAS implementation No. 71 is recognized in the profit balance as of January 1, 2020. Thus, the period of 2019 does not reflect the requirements of SFAS No. 71, so it is not comparative with the period in 2020. • The following assessments are based on the facts and circumstances of the initial application date (January 1, 2020): - Determination of business model - Establishing an investment in a owned equity instrument not to be traded to be measured at fair value through another comprehensive income. • If the credit risk of the financial instrument is undervalued, the Bank assumes that the credit risk for the financial asset has not increased significantly from the date of initial recognition SFAS No. 73: Lease The Bank has adopted the requirements of SFAS No. 73. Rent from January 1, 2020 retrospectively with cumulative impact in accordance with SFAS 73 in appendix C. 07. Based on such implementation options, the company is not obliged to present any impact arising from SFAS 73. The lease applied before the implementation date is expressed as cumulative from the remaining rent per date of implementation. SFAS 73 introduces single-model rental acknowledgement on balance sheet for tenant accounting. The lessee acknowledges the rights asset which is the right of a tenant to use the underlying asset of lease and lease liabilities which is the lesseer's obligation to make a rental payment. There are exceptions for short-term rental recognition and rental of low-value goods. The company recognizes assets and liabilities for all rentals with a period of more than 12 months and has a rental asset base value more than Rp75,000,000 (full Rupiah). In addition to this, the lease is recognized as a low-value or short-term rental that will later be recognized as cost in the reporting period.