5. Consolidated Statements of Cash Flows [Notes to 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 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 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. The adoption of FIN 48 did not have a material impact on the results of operations or financial position of NTT Group. 2. 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. As a result, the NTT Plan converted to NTT Kigyou-Nenkin-Kikin, a defined-benefit corporate pension fund. 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. 3. Subsequent event Additional acquisition of shares in Philippine Long Distance Telephone Company NTT DoCoMo acquired approximately 7% of outstanding common stock of Philippine Long Distance Telephone Company ("PLDT"), a telecommunication operator in the Philippines, for approximately 86.7 billion yen since March 2007, which resulted in a total of approximately 20% equity held by NTT Group as of January 22, 2008. NTT will account for the investment by retroactively applying the equity method and reclassify PLDT as an affiliate. Issue of bonds On December 14, 2007, the board of directors resolved that NTT may raise up to 220 billion yen by issuing bonds or incurring long-term borrowings during the period from January 1 to March 31, 2008. Based on this resolution, NTT issued bonds as follows: Series 53 Nippon Telegraph and Telephone straight bonds Date of payment January 30, 2008   Issue amount   70 billion yen   Issue price   99.91 yen per 100 yen   Interest rate   1.54%   Date of maturity   December 20, 2017   Use of proceeds   Capital investments Copyright (c) 2008 Nippon telegraph and telephone corporation