| 7. Consolidated Statements of Cash Flows | ||
 
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Important Matters Pertaining to the Preparation of Consolidated Financial Statements The consolidated financial statements of NTT have been prepared in conformity with accounting principles generally accepted in the United States of America (Opinions of the Accounting Principles Board, Statements of the Financial Accounting Standards Board, etc.) 1. Adoption of New Accounting Principles Accounting for Certain Commissions Paid to Agent Resellers Effective April 1, 2002, NTT adopted Emerging Issues Task Force ("EITF") Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products". The adoption results in the reclassification of certain amounts of commissions paid to agent resellers previously included in non-personnel expenses as a reduction of equipment sales. EITF 01-09 also requires that reduction of revenue and corresponding expenses be recognized at the time of equipment sales, in lieu of the date of payment. Consequently, sale of telecommunications equipment and nonpersonnel expenses decreased 558.9 billion yen, and 571.2 billion yen, respectively. The adoption also resulted in an adjustment as of April 1, 2002 for the cumulative effect of accounting changes in NTT's statement of operations and comprehensive income (loss) by 22.9 billion yen (net of taxes and minority interest in consolidated subsidiaries). Prior periods have been reclassified to be consistent with current year presentation. 2. Major Accounting Policies (1) Marketable Securities Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities" applies. (2) Valuation of Inventories Inventories have been valued according to acquisition cost, not exceeding current cost. First-in-first-out method applies to cost of telecommunication equipment, and averaging method applies to supplies. (3) Indication and Depreciation of Property, Plant, and Equipment Property, plant, and equipment are indicated according to acquisition cost. Depreciation is principally calculated by declining balance method (with the exception of buildings and structures depreciated by straight line method). (4) Goodwill and Intangible Assets SFAS No. 142, "Goodwill and Other Intangible Assets" has been adopted. (5) Liabilities for Employees' Severance Payments SFAS No. 87, "Employers' Accounting for Pensions," and SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination of Benefits," have been adopted. (6) Derivative Transactions SFAS No. 133, "Accounting for Derivatives Instruments and Hedging Activities," and SFAS No. 138 "Accounting for Certain Derivatives Instruments and Certain Hedging Activities, an amendment of SFAS No. 133" apply. (7) Corporate Income Taxes and Others Corporate income taxes and others have been computed on the basis of pre-tax net income (loss) in the consolidated income statement. The tax effect of carryforwards and temporary disparities between book value and tax statement prices of assets and liabilities is recognized as deferred tax assets or liabilities according to the asset and liability method. |
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