Intrum Justitia adopts International Financial Reporting Standards, IFRS

Following a decision made by the European Commission, all listed companies within the European Union must follow uniform accounting principles from 2005, International Financial Reporting Standards (IFRS). Intrum Justitia explains herein the main effects of the new rules on the company’s accounts. Comparative figures and opening balance. The new rules apply as of 1 January 2005. The company will also produce an Opening IFRS balance sheet as of 1 January 2004, which will be described in the Annual Report 2004. The year-end announcement and Annual Report for 2004 will furthermore disclose separately the 2004 financials restated to IFRS. The Interim reports during 2005 will include comparative figures for 2004 restated according to the new accounting principles. Business combinations and goodwill. New rules for allocating the acquisition cost to assets in an acquired company will apply from 2004. For acquisitions before 2004, the goodwill amounts reported in local currencies as of 31 December 2003 will remain fixed and no longer be amortized. This will improve consolidated earnings. Goodwill amortization during January-September 2004 amounted to SEK 84 M. The Group will continue to regularly test consolidated goodwill for impairment, which may result in write-downs. Purchased Debt. Intrum Justitia’s Purchased Debt portfolios will continue to be reported at cost less accumulated amortization. However, the amortization will be calculated based on an effective interest rate method. For each acquired portfolio, an effective interest rate is determined at the time of the acquisition, based on the purchase price and all estimated future cash inflows. When closing the accounts, a new assessment is made of the future cash flows, which are discounted to a net present value, using the effective interest rate which was determined for the portfolio when it was originally purchased. Changes in the net present value constitute the amortization for the period. The effect is that changes in estimates regarding future cash flows will have a more immediate impact on book values of the portfolios as well as on the operating profit for the service line. Furthermore, the change in principle results in a one-off increase in the book value of purchased debt. This is mainly because the calculation takes all future cash flows into account, whereas the old model more conservatively was limited to the next five years. Employee Stock Option program 2003/2009 (Subject to approval of IFRS 2 by the European Union). The theoretical value of the Group’s employee stock option program, approximately SEK 20 M, will be charged as a personnel cost during the period May 2004–December 2006. The value will be adjusted over this period for changes in the conditions for exercising – for example relating to profit growth – the allotted options. Currency futures and other derivatives. According to the new rules, derivatives will in most cases be valued at fair value instead of charging a premium over the duration of the agreement. The likely effect is an increase in volatility of net result. The amount of such transactions in the Group is however presently low, and the derivatives are generally of short duration. Therefore, the company does not expect the impact of the change in principle to be significant. Recoverable legal fees. In the debt collection process, Intrum Justitia sometimes pays external legal fees which are only recoverable from the debtor upon successful collection. Until now such outlays have been expensed directly as incurred, even though a significant portion may be recovered. Now the Group will change its accounting policy and report as receivables that part of the outlays which is estimated to be recovered. As a one-off effect of the change in policy, short-term receivables are estimated to increase by no more than SEK 35 M. Defined benefit pensions. Intrum Justitia has already implemented actuarial calculation from 2004 of the pension liability for defined benefit pension plans in Belgium, Finland, France, Germany, Italy and Norway. Concerning the Swedish multi-employer ”ITP” pension plan, Intrum Justitia will follow the statement issued by the Institute for the Accountancy Profession in Sweden, FAR, whereby this plan will be reported as a defined contribution plan. For further information please contact: Intrum Justitia AB (publ) Anders Antonsson, Director of Communications Tel: +46 8 546 10 206, mobile: +46 703 367 818 Bo Askvik, Chief Financial Officer Tel: +46 8 546 10 200