7. Consolidated Statements of Cash Flows |
|||||||||||||||||||||||||||||
 Significant Matters Pertaining to the Preparation of Consolidated Financial Statements The consolidated financial statements of NTT have been prepared in conformity with the 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 Conditional Asset Retirement Obligations Effective April 1, 2005, NTT Group adopted the Financial Accounting Standards Board ("FASB") Interpretation No. 47 ("FIN 47") "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143." FIN 47 provides guidance relating to the identification of and financial reporting for legal obligations to perform an asset retirement activity. The Interpretation requires recognition of a liability for the fair value of a conditional asset retirement obligation when incurred if the liability's fair value can be reasonably estimated. The adoption of FIN 47 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 is used. (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 No. 133, "Accounting for Derivative Instruments and Hedging Activities," SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," and SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" apply. (7) Income Taxes Income taxes are computed based on income (loss) before income taxes in the consolidated statements of income. According to the asset and liability approach, the expected future tax 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 On October 24, 2005, NTT DoCoMo, Inc. ("NTT DoCoMo"), a consolidated subsidiary of NTT, dissolved its capital alliance with KPN Mobile N.V. ("KPNM"). The i-mode license agreement between NTT DoCoMo and KPNM will be maintained. Under the agreement, NTT DoCoMo transferred all of its 2.16% holding of KPNM shares to Koninklijke KPN N.V. ("KPN"), the parent company of KPNM. KPN agreed to cooperate with NTT DoCoMo in the smooth operation of the global i-mode alliance, through the use of KPN's i-mode-related patents and know how, for example, and has paid cash of 5 million euro (approximately 690 million yen) to NTT DoCoMo. As a result of this transaction, NTT expects to record a gain on a sale of investment securities of 40.0 billion yen, including a foreign currency translation adjustment, as an other income for the year ending March 31, 2006. NTT also expects to account for the balance between the fair value of the transferred shares and the amount of cash received, approximately 14 billion yen, which NTT DoCoMo regards as the consideration for the agreement that will enable NTT DoCoMo to continue the development and expansion of I-mode services, as an operating expense. [Reference] Details of "Operating revenues" classified by the corresponding previous semi-annual period's service categories |
|||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||
|
