News Release 050512c

4. Non-Consolidated Comparative Statements of Cash Flows

4. Non-Consolidated Statements of Cash Flows

Significant Matters Pertaining to the Preparation of Non-Consolidated Financial Statements

1.Securities
	(1) Investments in subsidiaries and affiliated companies
		Investments in subsidiaries and affiliated companies are stated at cost, which are determined by the moving average method.
	(2) Other securities
		[1] Marketable securities The securities whose fair values are readily determinable are stated at fair value as of balance sheet date with unrealized gains and losses directly reported as a separate component of shareholders' equity. The cost of securities sold is determined by the moving average method. [2] Non-marketable securities The securities whose fair values are not readily determinable are stated at cost, which are determined by the moving average method.
2.Supplies
	Supplies are stated at cost, which are determined by the last purchase cost method.
3.Depreciation and amortization of fixed assets
	Property, plant, and equipment are depreciated by using the declining-balance method with the exception of buildings for which the straight-line method is used. Intangible assets are amortized on a straight-line basis. Their estimated useful lives and residual value are determined on the basis provided by the Corporate Income Tax Laws. Buildings, after having been depreciated over the depreciable periods based on the Corporate Income Tax Laws, keep depreciated up to the end of their actual useful lives. Internal-use software is amortized on a straight-line basis over their estimated useful lives within five years.
4.Deferred Assets
	Discount on bonds payable is amortized on a straight-line basis over the redemption period. As to bond issue cost, its total amount is expensed at the time of payment.
5.Allowances
	(1) Allowance for doubtful accounts To cover expected losses from bad debts, estimated amounts to be uncollectible are accrued, for general claims, computing on historical bad-debt ratios, and for specific claims including doubtful accounts, considering their own recoverability. No allowance is accrued as of this year-end. (2) Liability for employees' severance payments To provide for employees' pension benefits, benefit obligations and plan assets are estimated and accrued as of this year-end. Prior service cost is amortized on a straight-line basis over the average remaining service periods at the time of recognition. Actuarial net gain or loss is amortized on a straight-line basis over the average remaining services periods at the time of recognition.
6.Leases
	Finance leases other than those deemed to transfer the title of leased assets to lessees are accounted for in a similar manner as operating leases.
7.Hedging Activities
	(1) Accounting for Hedging Activities Hedging activities are principally accounted for under the "deferral hedge accounting." Designation ("Furiate-shori") is applied to forward exchange contracts and other foreign exchange contracts, and designated "exceptional accounting" ("Tokurei-shori") to interest-rate swaps that qualify for "exceptional accounting" (Footnote 14, Accounting Standards for Financial Instruments). (2) Hedging Instruments and Hedged Items [1] Hedging Instruments Hedging instruments include forward exchange contracts, currency swaps, coupon swaps (i.e. currency swap of interest portion only), interest-rate swaps, interest-rate options, and the combinations of the above. [2] Hedged Items Hedged items are assets (securities, loans, receivables, etc.) and liabilities (corporate bonds, borrowings, payables, etc.) exposed to variability of fair value or future cash flows derived from fluctuations of the exchange rate, interest rate, etc. (3) Hedging Policy To hedge the foreign exchange risks regarding assets and liabilities exposed to foreign exchange risks, forward exchange contracts, currency swaps, and other instruments are employed in compliance with internal rules. To hedge the interest-rate risks regarding assets and liabilities exposed to interest-rate risks, interest-rate swaps and other instruments are employed in compliance with internal rules. (4) Assessment of Hedge Effectiveness At the end of each quarter, hedge effectiveness is assessed on each hedging transaction. This quarterly assessment excludes any transaction where important terms and conditions such as principal, interest-rate, duration are identical between hedging instruments and hedged items.
8.Consumption Taxes
	Consumption taxes are separately accounted for by excluding it from each transaction amounts.

Notes to Non-Consolidated Balance Sheets

Accumulated depreciation on property, plant and equipment:

	March 31, 2005:		218,677 million yen
	March 31, 2004:		207,819 million yen

In compliance with the provisions of Article 9 of the Law Concerning Nippon Telegraph and Telephone Corporation, Etc., the total assets of NTT have been pledged as general collateral for corporate bonds issued. In accordance with the provisions of Article 9 of the Supplementary Provisions to the Law Concerning Partial Revision to the Nippon Telegraph and Telephone Corporation Law (law No. 98 of 1997), NTT is jointly responsible with Nippon Telegraph and Telephone East Corporation, Nippon Telegraph and Telephone West Corporation, and NTT Communications Corporation for corporate bonds issued prior to June 30, 1999 and the total assets of the four companies above have been pledged as general collateral for the said bonds.

Outstanding guarantees:

	March 31, 2005:		87,800 million yen
	March 31, 2004:		102,950 million yen

Notes to Non-Consolidated Statements of Income

Research & Development expenses included in operating expenses:

	Year ended March 31, 2005:		146,979 million yen
	Year ended March 31, 2004:		154,043 million yen