Promise Co., Ltd. has decided to recognize as an extraordinary loss the expenses associated with its compliance with the guideline of The Japanese Institute of Certified Public Accountants (JICPA) concerning the accounting treatment of allowances established by consumer finance and related companies for losses due to interest repayment claims. In addition, Promise has made the following revisions to its fiscal 2007 (April 1, 2006 - March 31, 2007) earnings forecast released on April 24, 2006 along with the announcement of the Company's financial results.
1. Revised Earnings Forecast for Interim Period of FY2007 (April 1, 2006 - September 30, 2006)| Consolidated | Operating income | Recurring profit | Net income | | Previous forecast (A) | 191,434 | 39,900 | 23,500 | | Revised forecast (B) | 190,532 | 15,301 | (159,416) | | Amount of revision (B-A) | (902) | (24,599) | (182,916) | | Percentage change (%) | (0.5) | (61.7) | (778.4) | | Result of FY2006 interim period | 190,460 | 52,807 | 31,358 | | YOY percentage change under original forecast | 0.5 | (24.4) | (25.1) | | YOY percentage change under revised forecast | 0.0 | (71.0) | (608.4) |
| Non-Consolidated | Operating income | Recurring profit | Net income | | Previous forecast (A) | 156,447 | 36,700 | 21,500 | | Revised forecast (B) | 155,325 | 12,572 | (143,741) | | Amount of revision (B-A) | (1,122) | (24,128) | (165,241) | | Percentage change (%) | (0.7) | (65.7) | (768.6) | | Result of FY2006 interim period | 154,227 | 49,356 | 28,580 | | YOY percentage change under original forecast | 1.4 | (25.6) | (24.8) | | YOY percentage change under revised forecast | 0.7 | (74.5) | (602.9) |
2. Revised Earnings Forecast for FY2007 (April 1, 2006 - March 31, 2007)| Consolidated | Operating income | Recurring profit | Net income | | Previous forecast (A) | 386,756 | 86,400 | 51,600 | | Revised forecast (B) | 372,500 | 25,700 | (154,100) | | Amount of revision (B-A) | (14,256) | (60,700) | (205,700) | | Percentage change (%) | (3.7) | (70.3) | (398.6) | | Result of FY2006 | 381,297 | 70,013 | 42,046 | | YOY percentage change under original forecast | 1.4 | 23.4 | 22.7 | | YOY percentage change under revised forecast | (2.3) | (63.3) | (466.5) |
| Non-Consolidated | Operating income | Recurring profit | Net income | | Previous forecast (A) | 314,979 | 76,000 | 44,800 | | Revised forecast (B) | 304,000 | 24,900 | (140,800) | | Amount of revision (B-A) | (10,979) | (51,100) | (185,600) | | Percentage change (%) | (3.5) | (67.2) | (414.3) | | Result of FY2006 | 307,960 | 67,718 | (40,994) | | YOY percentage change under original forecast | 2.3 | 12.2 | 9.3 | | YOY percentage change under revised forecast | (1.3) | (63.2) | (443.5) |
3. Principal Reasons for Revision | In response to the JICPA guideline concerning the accounting treatment of allowances established by consumer finance and related companies for losses due to interest repayment claims and in view of the increase in legal processes for debt restructuring, including those resulting from interest repayment claims, the Company computed an allowance for losses on interest repayments and expenses related to loan losses. In fiscal 2007 interim period, Promise has expected an increase of 37.5 billion yen for the consolidated and non-consolidated total operating expenses compared to the same period in the previous fiscal year, mainly an increase in the provision for uncollectible loans (credit losses), and the Company has accounted an allowance for losses on interest repayments (Consolidated: 174.9 billion yen, non-consolidated: 156.0 billion yen) as an extraordinary loss.
The allowance for losses on interest repayments applicable to the current interim period will not be tax exempt. Moreover, since it is not practical to reasonably schedule the allowance for losses on interest repayment from the standpoint of its tax effect, the Company plans to recognize the tax effect accounting for only its short-term portion and not apply tax-effect accounting for the long-term portion. |
| * | The above revision of the earnings performance forecast is a forward-looking statement made based on the information available at the time of the announcement of this revision. Actual earning performance could differ due to a variety of factors. |
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