Provident Financial - Interim Report & Accounts 2005

Adoption of International Financial Reporting Standards

Up to 31 December 2004 the group prepared its financial statements in accordance with UK Generally Accepted Accounting Principles (UK GAAP). On 1 January 2005 the group implemented International Financial Reporting Standards (IFRS). In this interim report the 2004 comparative financial information has been restated on the basis of the IFRS accounting policies as described in note 4.

The method prescribed by IFRS for the recognition of revenue on home credit loans results in revenue in excess of that to which we are contractually entitled being reported as revenue. There is an equal and compensating increase in the impairment charge. Whilst this “grossing up” does not change the reported profit, it does result in a material distortion of both revenue and the impairment charge. To give a more meaningful view of the quantum of credit losses we have also disclosed, for the home credit businesses, bad debt, calculated on the previous basis under UK GAAP.