News Release bqyt071109b

7. Consolidated Statements of Cash Flows

Supplemental information

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 Standards

Accounting for Certain Hybrid Financial Instruments

Effective April 1, 2007, NTT Group adopted Statement of Financial Accounting Standards No. 155 ("SFAS 155"), "Accounting for Certain Hybrid Financial Instruments - an amendment of the Financial Accounting Standards Board ("FASB") Statements No. 133 and 140." SFAS 155 permits an election for fair value remeasurement of any hybrid financial instrument containing an embedded derivative that otherwise would be required to be bifurcated from its host contract in accordance with SFAS No. 133, along with certain other clarifications and amendments to SFAS No. 133 and SFAS No. 140. The adoption of SFAS 155 did not have an impact on the results of operations or financial position of NTT Group.

Accounting for Servicing of Financial Assets

Effective April 1, 2007, NTT Group adopted Statement of Financial Accounting Standards No. 156 ("SFAS 156"), "Accounting for Servicing of Financial Assets - amendment of FASB Statement No. 140." SFAS 156 provides some relief for servicers that use derivatives to economically hedge fluctuations in the fair value of their servicing rights and changes how gains and losses are computed in certain transfers or securitizations. The adoption of SFAS 156 did not have an impact on the results of operations or financial position of NTT Group.

Accounting for Uncertainty in Income Taxes

Effective April 1, 2007, NTT Group adopted FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109." FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, it also provides guidance on derecognition, classification of current or non-current, interest and penalties, disclosure and transition. Management does not believe that the adoption of FIN 48 had a material impact on the results of operations or 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)

Liability for Employees' Retirement Benefits

SFAS 87, "Employers' Accounting for Pensions," and SFAS 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" apply.

(6)

Derivative Financial Instruments

SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," and SFAS 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.	The Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities.

On July 1, 2007, the NTT Kosei-Nenkin-Kikin ("NTT Plan") received permission to be relieved of the obligations related to past services to disburse the NTT Plan benefits covering the substitutional portion. However, no accounting should occur until the completion of the entire transfer. It is undetermined when the transfer of the benefit obligations and related plan assets will take place and what the net effect of settlement on result of operations and financial position of NTT Group will be. If the payment of the amount equivalent to the pension assets to be transferred had been made on March 31, 2007, the estimated amount of such effect on result of operations of NTT Group would have been approximately 340 billion yen.

4.	Subsequent event

On November 9, 2007, the board of directors resolved that NTT may acquire up to a total not exceeding 200,000 outstanding shares of its common stock at an amount in total not exceeding 100 billion yen from November 12, 2007 through March 24, 2008.