7. Consolidated Statements of Cash Flows |
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 Significant 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 (Accounting Principles Board Opinions, Statements of Financial Accounting Standards, etc.) 1. Application of New Accounting Standard Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity Effective April 1, 2004, NTT Group adopted Statement of Financial Accounting Standards No. 150 ("SFAS 150"), "Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity." This statement changes the accounting for certain financial instruments with characteristics of both liabilities and equity that, under previous guidance, could be classified as equity, by now requiring those instruments to be classified as liabilities (or assets in some circumstances) in the balance sheet. Further, SFAS 150 requires disclosure regarding the terms of those instruments and settlement alternatives. The adoption of SFAS 150 did not have an impact on the results of operations or the financial position of NTT Group. 2. Principal Accounting Policies (1) Marketable Securities SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities" applies. (2) Inventories Inventories are stated at cost, not in excess of market value. The cost of telecommunications equipment to be sold is determined by the first-in first-out method. (3) Property, Plant, and Equipment and Depreciation Property, plant, and equipment are stated at cost. Depreciation is computed principally using the declining-balance method with the exception of buildings for which the straight-line method. (4) Goodwill and Other Intangible Assets SFAS 142, "Goodwill and Other Intangible Assets" applies. (5) Liabilities for Employees' Severance Payments SFAS 87, "Employers' Accounting for Pensions" and SFAS 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination of Benefits" apply. (6) Derivative Financial Instruments SFAS 133, "Accounting for Derivatives Instruments and Hedging Activities," SFAS 138 "Accounting for Certain Derivatives Instruments and Certain Hedging Activities, an amendment of SFAS No. 133" and SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" apply. (7) Income Taxes Income taxes are computed on income (loss) before income taxes in the consolidated statements of income. According to the asset and liability approach, the expected future consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities and of operating loss carryforward are recognized as deferred tax assets or liabilities. 3. Subsequent events In April 2005, the Board of Directors of NTT DoCoMo, Inc. ("NTT DoCoMo"), a consolidated subsidiary of NTT, and its eight regional subsidiaries decided to cease providing Quickcast services as of March 31, 2007 in the view that the improvement of profitability of Quickcast business is unlikely considering downward trend in the number of subscribers. On April 27, 2005, NTT DoCoMo entered into an agreement with Sumitomo Mitsui Card Company, Limited ("Sumitomo Mitsui Card"), Sumitomo Mitsui Financial Group, Inc. and Sumitomo Mitsui Banking Corporation that NTT DoCoMo and these companies would jointly promote the new credit transaction services which use the "Mobile Wallet" phones and NTT DoCoMo would form a capital alliance with Sumitomo Mitsui Card. Based on the agreement, NTT DoCoMo plans to acquire 34% of Sumitomo Mitsui Card's common shares for approximately 98 billion yen including new shares to be issued by Sumitomo Mitsui Card. NTT DoCoMo agreed to sell its entire shares of Brilliant Design Limited ("BD"), which has 20% ownership of Hutchison 3G UK Holdings Limited ("H3G UK"), to Hutchison Whampoa Limited ("HWL") for a total consideration of 120 million pounds in a Sale and Purchase Agreement signed between the NTT DoCoMo and HWL. Under the terms of the agreement, NTT DoCoMo will receive the payment in three installments, final installment of which is expected to be made in December 2006. On May 9, 2005 NTT DoCoMo received a notice from HWL that HWL exercises its right to accelerate completion of the payment. In accordance with the agreement, NTT DoCoMo will complete the sale of BD shares to HWL on June 23, 2005. [Reference] Details of "Operating revenues" classified by the previous year's service categories ![[Reference]](gif/050512b_09b.gif) |
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